Unemployment Insurance

A Webinar Exclusively for Arizona Nonprofit Organizations

In partnership with:

The conference will begin shortly. To hear the audio portion of this presentation, please dial:1-866-740-1260 Passcode 2792966

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

Dec. 2010 Trust Fund Balance: -$236 Million

Dec. 2011 Trust Fund Balance: -$361 Million

Dec. 2012 Trust Fund Balance: -$312 Million

Dec. 2013 Trust Fund Balance: $26 Million

UNEMPLOYMENT(number of unemployed)

June 2011 Unemployment: 290,407 (9.5%)

June 2012 Unemployment: 253,777 (8.4%)

June 2013 Unemployment: 243,443 (8.1%)

June 2014 Unemployment: 210,367 (6.9%)

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

16

Claim filed at local unemployment insurance

office by employee

Claim notice generated to the employer

Verbal and written communication with the local office adjudicator

Decision(s) issued to both parties by the local office adjudicator on relevant

issues

CLAIMS PROCESS ENDS

Reconsideration by adjudicator or hearing

scheduled

Unemployment hearing at which testimony is

presented on the issued appealed

Decision sent by mail to both parties

CLAIMS PROCESS ENDS

APPE

AL FI

LED

Board evaluates hearing transcript

Decision issued – end of administrative process

CLAIMS PROCESS ENDS*

APPEAL FILE

D

* 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.

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!

$0 $40,000 $80,000 $120,000 $160,000

2005200620072008200920102011201220132014

SUTA

First Nonprofit Group

Preschool yard equipment

$11,317

  Projector, camera and shredder

$1,374

2 Fundraising events

$18,789

  3 Computers and 2 printers

$7,352

Utilities (one year)

$47,693

  Microwave, washer and 2 Dishwashers

$1,611

Conferences and Conventions

$8,584   Office furniture $2,950

      TOTAL: $99,670

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 DirectorFirst Nonprofit Group

An AmTrust Financial Companywww.firstnonprofitgroup.com

 Phone: 214-360-2477

Beth.Quynh@firstnonprofit.com