Serving Nonprofits. Strengthening West Virginia.

Nonprofit 501(c)3 Unemployment Options

By on September 8, 2015 in News

West Virginia Capitol

Ron Lucki
UC Assure

There is no avoiding the State Unemployment Insurance expense. For-profits, nonprofits, and public entities must budget for this state-operated insurance program which is designed to partially replace lost wages when a person is out of work through no fault of their own.  Like auto, home, health and disability insurance, it is for an emergency.

Although all three types of employers are faced with unemployment costs, the difference is how the cost is managed. For-profit organizations have one option: They must pay a tax into the State Unemployment Insurance Fund.

Nonprofit 501(c)3 organizations have two options:

  1. The organization can pay the state unemployment tax which is based on the rates set by the state and experience of the individual employer. Since it is a socialized system, the benefit charges from industries with high rates of layoffs are spread across all employers in the state. So even though an individual organization may experience a downward trend in benefit charges, the overall tax can still increase or remain the same because the cost is spread amongst all taxpaying employers in the State.
  1. The second option is called “reimbursing” which is based on section 3309 of the Federal Unemployment Tax Act of 1972. The Act enables 501(c)3 nonprofit organizations to opt out of the state tax system and reimburse the state only for claims the state has paid out to the nonprofits’ former employees. The reimbursing option can result in significant savings over the tax system

But there is a catch to it! Reimbursing Employers are responsible for all of the unemployment claims paid to their former employees by the state, no matter the amount. Therefore, the organization could face unpredictable and unlimited unemployment benefit charges from the State.

There is another proven way for nonprofits that are risk averse. That is to purchase an unemployment insurance program which transfers the risk to an insurance company. The organization then receives a fixed rate and protection against the uncertainty of being a reimbursing employer. The insurance program may reduce your unemployment costs up to 50% while providing reliable and predictable coverage during times when grants or funding are reduced which can lead to layoffs and ultimately higher unemployment benefit charges.

In addition to the confidence an insured unemployment program can bring, the nonprofit’s staff will have access to an experienced and professional administrator to manage and mitigate unwarranted benefits and provide hearing representation.

Even though the Federal Unemployment Tax Act has been around for over 40 years, there are still 501(c)3 nonprofit organizations unaware of the “reimbursing” option and the use of insurance to protect them from the unexpected.

If you would like to learn more about your unemployment insurance options, please call Ron Lucki at UC ASSURE toll free at 1-800-628-8581, ext. 5231 or via email at


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