3 Things All Nonprofits Should Know About Unemployment Insurance

Posted By: Anna Overstrom-Coleman Nonprofit Management, Financial Management, Governance + Leadership, Legal,

Nonprofits that proactively learn about unemployment taxes, also known as unemployment insurance (UI), can lower associated costs. Here are the top 3 things every nonprofit should know:

1. What is the state Unemployment Insurance (SUI) Tax?  

The state Unemployment Insurance (SUI) tax is an insurance program that provides temporary, partial wage replacement to workers who have become unemployed through no fault of their own. The program is funded by Unemployment Taxes paid by employers.  Each employer is assigned a tax rate, which is based on the amount of benefits charged to their account each year.

2. Is Your Nonprofit Liable?  

501(c)(3) nonprofits are exempt from federal unemployment taxes, but may be liable for state unemployment taxes if they meet something called the “4 for 20” provision. This provision is triggered when four or more individuals are employed on the same day for 20 weeks in a calendar year, though not necessarily for consecutive weeks.

Even for small nonprofits that are exempt from liability, we strongly encouraged that they pay into the unemployment tax system, or an alternate coverage plan, to protect their current employees from the ups and downs of employment.

3. What are Potential Cost-Saving Alternatives?

Since 2002, MANP has partnered with UST to help members lower the cost of unemployment. UST provides an alternative to paying into the state unemployment tax system. Through UST Trust, agencies directly reimburse the state only for the claims of their former employees, dollar for dollar. This saves organizations up to 60% on unemployment costs

  • The deadline to opt out in Maine is November 30th each year.
  • Learn more, including how to request a free savings evaluation. 
  • Or, register here for one of UST’s upcoming webinars this Fall through Winter for additional information.