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State Unemployment Insurance From a Nonprofit’s Perspective.

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Presentation on theme: "State Unemployment Insurance From a Nonprofit’s Perspective."— Presentation transcript:


2 State Unemployment Insurance From a Nonprofit’s Perspective

3 First Nonprofit Group An AmTrust Financial Company Based in Chicago, Illinois Our State Unemployment Insurance (SUI) programs serve more than 1,600 nonprofits across the country, covering in excess of 300,000 employees.

4 FNG National Nonprofit Partners

5 Financing Options Available for SUI Two ways to satisfy SUI obligation –Through the state tax fund (2014) Pay assigned rate on the first $8,750 per employee –Minimum Rate = 3.6785%, Maximum Rate 10.8937% –Cost variance $322 - $953 per employee –Paid on quarterly basis –*For 2015, Wage Base will increase to $9,000* –Become a “Reimbursing” employer – Two options Option One: Self-insure one’s unemployment benefits –State issues a bill to the employer at the end of each month for claims paid to former employees Option Two: Risk pool, trust, or insure through 3 rd Party

6 Pros and Cons SUI Tax Fund Advantages –Fixed annual cost –No risk beyond assigned tax rate Disadvantages –The solvency level of fund sets rates –Socialized costs –Costs can increase even if experience improves –Added strain on cash flow as a majority of tax liability paid by mid-year Reimbursing (Self-Insured) Advantages –Lower Cost –Removed from Solvency issues Disadvantages –No cap to annual exposure –State Extended Benefits Adds up to 13-20 addt’l weeks Gov’t entities not eligible for Federal subsidization of claims

7 Forward Thinking: Getting Prepared to Address the Rising Costs of Unemployment Insurance

8 How the SUI System Works Who are the “Insurers” –Main: SUI trust fund Financed by employer paid premium via the SUI tax –Secondary: Private sector/self-insured employers Only 501(c)3 & governmental employers eligible Who are the “Reinsurers”? –Federal government = State tax funds Done via the Title XII Loan Program which is backed by the Federal Unemployment Tax Account –Current loan balance: $21.7 Billion Financed by FUTA (paid by all for-profit employers) –Private sector = Secondary

9 State UI Trust Funds Map depicts the status of state trust fund solvency as of July 31, 2014. RED - On Title XII Loan as of the end of July 31, 2014 BROWN – Issued bonds to repay loan to Federal Gov’t YELLOW - Positive balance but <6 months of benefits in the state trust fund GREEN - Positive balance and >6 months of benefits in the state trust fund

10 Market Changes Since 2012 : Path to Solvency U.S. Department of Labor (Passed) –Solvency standards for State Unemployment Funds to qualify for Title XII, effective 1/1/14 Reinsurance State Legislation: SB 1310 (Passed), Act 60 (Passed) –SB 1310 increased Wage Base from $8,000 to $10,000, incrementally until 2018. –Act 60 financed $3.3 Billion in bonds to repay Fed Gov’t Resulting in Interest Assessment added to regular Unemployment Tax Rates Administration’s proposal FY ‘14 Budget (Pending) –Increase Federal UI Taxable Wage Base to $15,000 Currently $7,000 SUI Taxable Wage Base must meet federal minimum Effective 1/1/16 –Index Federal UI Taxable Wage to average annual wage

11 SUI Fund – Average Cost Per Employee Pennsylvania –2009: $458 –2010: $529 –2011: $521 –2012: $536 –2013: $577 –2014: $614

12 Unemployment Products Meeting the Needs of Nonprofits

13 Unemployment Products Bonded Service Program Unemployment Savings Program Excess Loss Insurance State Mandated Surety Bonds

14 Bonded Service Program Features Fully insured program –First and last dollar coverage –Premium set at % of gross wages Fixed annual cost –Precise allocation to fund source Budgetary certainty Potential Experience Credit/Refund Maximizes cash flow –Billed in equal quarterly installments Claims administration service –On-site education and training –Benefit charge auditing –Comprehensive claims counseling –Hearing representation Average client savings* 2013: 24% 1998-2013: 27% *Does not include Experience Credit/Refund

15 Unemployment Savings Program Features Proprietary reserve account –Only responsible for organization’s own claims (no pooled/shared risk) –Fixed annual deposit (the insured owns the balance) Stop loss insurance –Protects organization from unforeseen layoffs or excess loss Interest bearing reserve –Average investment return = 4.14% (2004-2013) –2013 = 5.60% return Administrative costs –Covers stop loss insurance, management fee, commission and claims administration Maximizes cash flow –Billed in equal quarterly installments Claims administration services –Handles all correspondence with state on member’s behalf –Benefit charge auditing –Claims counseling and hearing representation Average client savings* 2013: 32% 1995-2013: 39% *Does not include reserve account

16 Unemployment Claims Service Includes: Audit of Benefit Charges –Benefit awards, claims duration, and liability for accuracy –Ensure credits are received –Audit charges to wages paid to detect fraud Claims –Process all separation data and unemployment claims –Review, prepare arguments, and protest decisions as needed –Attend all unemployment hearings Technical services –Review personnel policies and procedures (all hiring and separation) –Provide educational workshops for management and supervisors –Customized claims activity reports Online access –Individual claim status reports

17 Info for Quote

18 How to Receive a Quote? Pennsylvania 1.Complete application form (two pages) 2.3 rd quarter 2013 to most current State Quarterly Wage Filing – Summary page only (UC-2 forms) 3.Taxpaying Employers: 2014 “PA UC Contribution Rate Notice” (UC-657 form) July 2013 to most current “Monthly Notice of Compensation Charged” (UC-640 form) 4.Reimbursing Employers: July 2011 to most current “Notice of Reimbursable Amount Due” 5.Fax to 312-239-8368

19 State Requirements to Convert from the State Tax Fund to Reimbursing 501(c)3 IRS certificate Letter of intent Surety Bond (provided at no addt’l cost for BSP & USP clients) –State determines value Timing –All paperwork must be submitted to the state by December 1 st –Conversion effective for calendar year 2015

20 Thank You! John Pichola Regional Sales Director First Nonprofit Group An AmTrust Financial Company 1 South Wacker Drive, Suite 2380 Chicago, IL 60606 Direct: 215-240-4864 Cell: 610-724-1153

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