Chapter 1 Employer Taxes and Wage Reporting
Section 6 - Reimbursment Option - Special Notes for Nonprofit Organizations
Nonprofit organizations that are exempt under 501(c)(3) of the Internal Revenue Code may either pay unemployment contributions on taxable wages on a quarterly basis, or may reimburse the Unemployment Trust Fund for benefits paid. Worker contributions are to be deducted at the rates indicated here, for the Health Care Subsidy Fund, Unemployment Insurance Trust Fund, Workforce Development Partnership Fund, and Family Leave Insurance, and forwarded to the Department of Labor and Workforce Development with the quarterly reports.
A newly subject nonprofit organization that elects to reimburse the Fund for benefits paid must file written notice of its intention with the Division of Employer Accounts within 120 days of the day on which the organization attains subject status, or not later than 30 days from the date on which the organization is notified of its subjectivity, whichever is later. Nonprofit organizations on a contributions schedule may change to a reimbursement basis by filing a written notice to that effect with the Division of Employer Accounts not later than February 1 of any calendar year. Elections to reimburse will be effective for a period of not less than two calendar years.
Two or more employers who are liable for reimbursement of the benefit costs in lieu of contributions may apply to establish a “group account” for the purpose of sharing the cost of benefits paid.
Nonprofit organizations that elect to reimburse the Fund for benefit payments will be required to furnish proof of financial responsibility or file a surety bond with the Department. The amount of the bond or deposit will not exceed the amount derived by multiplying the organization’s taxable wages for the preceding calendar year, or the estimated taxable wages for the ensuing year, whichever is greater, by the maximum unemployment insurance contribution rate in effect at the beginning of the calendar year for which the bond or deposit is required (currently 5.8 percent).
Nonprofit organizations that have elected to make reimbursements of costs for benefits paid that are attributable to base-year wages earned during the reimbursement election period are billed on a quarterly basis.
A nonprofit organization may file a written notice terminating its election, not later than February 1 of any calendar year in which the termination is to become effective.
If an election for reimbursement is terminated by a nonprofit organization or cancelled by the Division of Employer Accounts, the nonprofit organization remains liable for the reimbursement of all benefits paid that were based on wages earned in the employ of the nonprofit organization during the effective period of the election.
As of the effective date of the termination of an election for reimbursement, a nonprofit organization will become liable to pay unemployment insurance contributions on taxable wages paid to its employees subsequent to the termination. Its contribution rate beginning with the first July 1 in the period following the termination will be assigned in accordance with the experience rating provision of the law, except that:
1. The benefit charges to its account that are attributable to base-year services during the effective period of the election will not be included in the total benefit charges to its account in the calculation of its reserve balance for determining its rate.
2. Its average annual payroll will be determined without inclusion of any of the wages paid in any calendar year during which its election for reimbursement was effective for any part of the calendar year.
3. The period during which the election for reimbursement was effective will not be included in calculating the period of eligibility for modification of its rate.
4. For the period from the date of termination to July 1 following termination, a rate of 1% will be assigned for contributions under the Unemployment Compensation Law.
NOTE: The reimbursement option is not available for temporary disability contributions.