Unemployment Insurance
A Webinar Exclusively for Arizona
Nonprofit Organizations
The conference will begin shortly.
To hear the audio portion of this presentation, please dial:
1-866-740-1260 Passcode 2792966
In partnership with:
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.
FNG National Nonprofit Partners
Financing Options Available for SUI
• Two ways to satisfy SUI obligation
– Through the state tax fund (2014)
• Pay assigned rate on the first $7,000 per employee
– Minimum Rate = 0.03%, Maximum Rate 7.17%
– From $2.10 to $501.90
– Paid on quarterly basis
– Become a “Reimbursing” employer – Two options
• Self-insure one’s unemployment benefits
– State issues a bill to the employer at the end of each
quarter for claims paid to former employees
• Risk pool, trust, or insure through 3rd Party
Pros and Cons of the 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
What is Reimbursing?
• Organization is financially responsible for reimbursing the
state dollar-for-dollar on former employees’ unemployment
claims.
• Advantage
– Lower cost
• Disadvantages
– No limit to aggregate annual costs (self-insured or 3rd party plan
without cap)
• Max individual claim = $6,240 ($240 per week x 26 weeks)
–
–
–
–
Inability to accurately budget for cost (self-insured)
Exposure to severe fluctuation in costs (self-insured)
Loss of certain protest rights (all reimbursing employers)
Must track credits due (all reimbursing employers)
Forward Thinking: Getting
Prepared to Address the Rising
Costs of Unemployment
Insurance
A Quick Look at Arizona’s
Unemployment
UNEMPLOYMENT
(number of unemployed)
June 2011 Unemployment: 290,407 (9.5%)
Dec. 2010 Trust Fund Balance: -$236 Million
June 2012 Unemployment: 253,777 (8.4%)
Dec. 2011 Trust Fund Balance: -$361 Million
June 2013 Unemployment: 243,443 (8.1%)
Dec. 2012 Trust Fund Balance: -$312 Million
June 2014 Unemployment: 210,367 (6.9%)
Dec. 2013 Trust Fund Balance: $26 Million
SUI Fund – Average Cost Per
Employee
• Arizona
– 2009: $ 93
– 2010: $140
– 2011: $155
– 2012: $165
– 2013: $165
– Target: $244
Path to Solvency
• U.S. Department of Labor (Passed)
– Solvency standards to qualify for Title XII, effective 1/1/14
• Current balance of Arizona UI Trust Fund = $4,568,726
• Balance required to meet initial standards = $85,051,866
– Ineligible for Interest Free Reinsurance Program
• State of Arizona HB 2173 (Passed)
– Authorization to issue $200M in bonds to repay Federal Loan
• Administration’s proposal
– Increase Federal UI Taxable Wage Base to $15,000 in 2017
• Currently $7,000
• SUI Taxable Wage Base must meet federal minimum
– Index Federal UI Taxable Wage to average annual wage
• If indexed today, UI Taxable Wage base would be $16,600
Unemployment Products
Meeting the Needs of Nonprofits
Unemployment Products
• Bonded Service Program
• Unemployment Savings Program
Must currently have reimbursing employers status
or convert to reimbursing status to participate!
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
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
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
The Claims Process
Claim filed at local
unemployment insurance
office by employee
Claim notice generated to
the employer
Verbal and written
communication with the
local office adjudicator
Reconsideration by
adjudicator or hearing
scheduled
Unemployment hearing at
which testimony is
presented on the issued
appealed
Board evaluates hearing
transcript
Decision(s) issued to both
parties by the local office
adjudicator on relevant
issues
Decision sent by mail to
both parties
Decision issued – end of
administrative process
CLAIMS PROCESS ENDS
CLAIMS PROCESS ENDS
CLAIMS PROCESS ENDS*
* Further appeal to circuit court and higher can be initiated by the claimant or employer’s legal counsel. All
claims may not go this far in the process. Our procedure is to advise the employer if the further appeal is not
warranted on questionable loss decisions.
16
Savings Samples
Case Study
• Since 2005, a First
Nonprofit Group member
providing child care and
educational services has
saved over $100,000 on
it’s unemployment
insurance costs.
• What does a $100,000
savings translate into?
More money for your
cause!
SUTA
First Nonprofit Group
$0
$40,000
Preschool yard
equipment
2 Fundraising
events
Utilities (one
year)
Conferences and
Conventions
$80,000
$11,317
$18,789
$47,693
$8,584
$ 12 0 , 0 0 0
$ 16 0 , 0 0 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Projector, camera and
shredder
3 Computers and 2
printers
Microwave, washer
and 2 Dishwashers
Office furniture
$1,374
TOTAL:
$99,670
$7,352
$1,611
$2,950
Savings
• 2014 members saved an average of
$41,473 on their unemployment costs
• Through our partnership with the Alliance
of Arizona Nonprofits, our Arizona
members have saved over $1 million!
Info for Quote
How to Receive a Quote?
Arizona
All employers:
• Complete application form (two pages)
• Four most recent State Quarterly Wage Filing (UC-018) forms
– Summary page only
Taxpaying employers:
• 2012, 2013, and 2014 “Determination of Unemployment Tax
Rate” forms
• 7/1/11 – 6/30/14 “Benefit Charge Notice” forms
Reimbursing employers:
• 12 Most recent “Benefit Charge Notice” forms
Fax all info to 312-239-8368.
Quarterly Wage Filing
“Determination of Unemployment
Tax Rate”
“Benefit Charge Notice”
State Requirements to Convert from
the State Tax Fund to Reimbursing
• 501(c)3 IRS certificate
• Letter of intent
• Timing
– All paperwork must be submitted before
November 30th
– Conversion effective January 1, 2015
Thank You!
Beth Quynh
Regional Sales Director
First Nonprofit Group
An AmTrust Financial Company
www.firstnonprofitgroup.com
Phone: 214-360-2477
Beth.Quynh@firstnonprofit.com