Nonprofit members have reached out to the Minnesota Council of Nonprofits (MCN) regarding unemployment insurance (UI) for nonprofit employers and unemployment compensation benefits (UC) for nonprofit employees.
The information provided on this website does not, and is not intended to, constitute legal advice, and rather is for general information purposes only.
Unemployment Insurance (UI) for Nonprofit Employers
Many of you who have reached out or are reading this have employees who will be eligible for unemployment insurance (UI) due to the coronavirus pandemic (COVID-19), and are concerned about the upcoming associated costs, whether you are a reimbursing employer or pay into the state’s UI pool (nonprofits are able to choose between these two options). If you are not sure which category your organization is in, check out this great blog post: https://www.councilofnonprofits.org/thought-leadership/self-insured-nonprofits-and-unemployment-insurance
from our colleague David Heinen at the North Carolina Council of Nonprofits.
In a nutshell, if you pay a UI tax to the state, you are a “tax-paying” employer, meaning you pay into the state’s UI pool. If you have a trust account where you keep funds for paying unemployment claims, you are a “reimbursing” or “self-insured” employer. It’s also possible you’re a nonprofit exempt from unemployment laws – houses of worship, religious organizations affiliated with houses of worship, and religious schools, as well as nonprofits with fewer than four employees who work during 20 weeks of the year – employees of those SUTA-exempt charitable organizations are not eligible for unemployment insurance benefits.
Minnesota Department of Employment and Economic Development (MN DEED) is keeping a well-updated page with information for employers: https://www.uimn.org/employers/employer-account/news-updates/covid-19.jsp.
Please see MN DEED’s message to nonprofit employers, which includes information about cash advances, grant extensions, and a note that during this time, DEED is “doubling down on our commitment to our nonprofit partners.”
For reimbursing employers:
Both the U.S. House and Senate have released versions of a fourth relief stimulus package, but as of late October have not managed to pass any relief for over six months. This is unacceptable.
The third federal COVID-19 related stimulus package passed many months ago, the CARES Act, covered for reimbursing nonprofits 50 percent of the costs of benefits provided to their laid-off employees. MCN is leading national advocacy efforts for Congress to increase this relief to 100 percent.
The proposed fourth packages have varied in their approach to relief for reimbursing employers. While most have not included increasing relief over 50%, one of the U.S. Senate’s proposals did include an increase in relief to 75 percent in its proposal (called the HEALS Act), released on July 27.
One piece of good news is that Congress fixed a problem it had created. Previously, the US Department of Labor interpreted the CARES Act provision to say that a reimbursing organization needs to pay 100 percent of its UI bill, then seek reimbursement for 50 percent of the cost from the state.
Knowing that many organizations will not be able to pay the full bill, and that this guidance creates more work for both employers and the state, we and other organizations around the country advocated that the language in the CARES Act be amended slightly to fix this problem. The Protecting Nonprofits from Catastrophic Cash Flow Strain Act at the federal level (S. 4209), includes that fix and removes the burden of orgs having to pay 100 percent of their bill, then wait to receive 50 percent back. That bill is now law, removing this burden.
The Minnesota Department of Employment and Economic Development (DEED) has temporarily suspended billing for reimbursing employers, as well as interest and penalties on any outstanding amounts. In late October 2020 DEED sent a letter to reimbursing employers outlining the agency’s implementation plan for relief of charges.
The letter states that DEED will be making changes to employers’ accounts in two phases. First, DEED will work to remove charges for benefits relieved by the federal government. Each organization will receive a letter from DEED when that phase of the work is complete. Next DEED will then look at organizations’ eligibility for relief under state law. Employers may receive a questionnaire as a way to provide DEED with more information about your organization’s situation. This is where DEED will be determining if your organization qualifies for relief under state statute. Minnesota statute states that unemployment benefits paid will not be charged to the reimbursable account of a base period nonprofit when the applicant’s unemployment from this employer was a direct result of an “act of nature,” where 25 percent or more of the employees employed at the affected location, including the applicant, became employed as a result. (Minn. Stat. § 268.047 Subd. 2(5)) Governor Walz clearly stated that the coronavirus pandemic is an “act of nature” in Executive Order 20-01. Each employer will receive another letter from DEED upon their completion of that work, and will have an opportunity to provide more information to DEED if you think they missed something.
MCN will continue to be in contact with DEED to advocate for generous application of state relief when applicable. We will continue to provide updates about actions you can take and information regarding UI via the policy section of MCN’s COVID-19 resource page, email through the Nonprofit Advocate (subscribe!), and MCN’s social media channels.
For taxpaying employers:
One very important step Governor Walz took was to issue Executive Order 20-05
that relieves taxpaying employers of benefits charges associated with COVID-19. This means that for those organizations, your future UI tax rate will not increase if your workers collect unemployment benefits because of COVID-19. DEED notes on its webpage that you do not need to notify the agency to be relieved of these charges.
Other employer-related provisions in the CARES Act
Emergency Small Business Loans (emergency SBA 7(a) loans): Provides funding for special emergency loans of up to $10 million for eligible nonprofits and small businesses, permitting them to cover costs of payroll, operations, and debt service, and provides that the loans be forgiven in whole or in part under certain circumstances. Title I, Section 1102.
- General Eligibility: Available to entities that existed on March 1, 2020 and had paid employees.
- Nonprofit Eligibility: Available for charitable nonprofits with 500 or fewer employees (counting each individual – full time or part time and not FTEs). The final bill does not include a provision in earlier drafts that would have disqualified nonprofits that are eligible for payments under Title XIX of the Social Security Act (Medicaid).
- Loan Use: Loan funds could be used to make payroll and associated costs, including health insurance premiums, facilities costs, and debt service.
- Loan Forgiveness: Employers that maintain employment between March 1 and June 30 would be eligible to have their loans forgiven, essentially turning the loan into a grant. Section 1106.
Employee Retention Payroll Tax Credit: Creates a refundable payroll tax credit of up to $5,000 for each employee on the payroll when certain conditions are met. The entity had to be an ongoing concern at the beginning of 2020 and had seen a drop in revenue of at least 50 percent in the first quarter compared to the first quarter of 2019. The availability of the credit would continue each quarter until the organization’s revenue exceeds 80 percent of the same quarter in 2019. For tax-exempt organizations, the entity’s whole operations must be taken into account when determining the decline in revenues. Notably, employers receiving emergency SBA 7(a) loans would not be eligible for these credits. Section 2301.
What about people who are self-employed?
The federal CARES Act includes coverage for workers who are furloughed, gig workers, and freelancers.
Unemployment Compensation Benefits for Nonprofit Employees
With a rapidly changing economy due to COVID-19, on March 16 Governor Tim Walz announced via Executive Order 20-05 that he would expand availability for unemployment compensation.
Unemployment compensation supports workers when they become unemployed or have had their hours greatly reduced. The governor waived the normal wait period for unemployment benefits in order to support workers as quickly as possible and adjusted the requirement that one needs to be looking for work while receiving benefits. He expanded eligibility in the context of our public health crisis to workers who:
- Have been told by a health professional to avoid contact with others,
- Have been told to not come into work because of the outbreak, or
- Are unable to work due to canceled school or unavailable daycare or child care.
To apply for unemployment benefits in Minnesota, go to www.uimn.org. More information on unemployment insurance and COVID-19 can be found by clicking here. Updated information from DEED can be found by clicking here.