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 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.
For reimbursing employers:
There has been no relief for reimbursing (aka self-insured) employers at the state level at this time, but under Minnesota Statutes section 268.067, the Unemployment Insurance Program may statutorily suspend or waive interest and penalties accrued for reimbursing employers during this time period. MN DEED has indicated it is likely that the department will choose to do this for reimbursing employers. The agency also has compromise authority under the same state statute.
MCN is in conversation with MN DEED, and are grateful to hear the agency’s commitment to working with nonprofits and other organizations as UI costs rise. While MN DEED is appropriately focusing now on applications for unemployment, over the next weeks and months (as the time you will receive your UI bill gets closer) the agency will be thoughtfully considering its authority to waive penalties and fees associated with the effects of COVID-19, and even its ability to be flexible with individual organizations who face true hardship in paying their UI bills.
MCN will continue to work with MN DEED and advocate for relief for nonprofit employers. MCN 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.
- NOTE 1: MN DEED announced March 23 the creation of an emergency loan program for small businesses in MN. According to DEED, “The loan program is intended to help businesses temporarily closed under Executive Order 20-04, later clarified by Executive Order 20-08, which stopped onsite customer dining at restaurants and bars and closed an extensive list of other small businesses whose owners may not have adequate cash flow to withstand temporary closure.” The agency expects loan applications to be open later in the week of March 23.
- NOTE 2: State UI laws differ, so if you hear from a similar org in another state about their situation, it is likely not exactly the same as in MN.
- NOTE 3: A taxpaying or reimbursable organization’s employees eligible for UI will receive UI compensation, even if the organization is not able to pay its UI bill.
Congress’ CARES Act, which is not yet law, would cover the cost for reimbursing nonprofits of half of the costs of benefits provided to their laid-off employees. MCN will continue advocating for more relief for reimbursing employers (and will likely have a call to action for you in coming days!)
Other employer-related provisions in the not-yet-law 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, which is not yet signed into law, includes coverage for workers who are furloughed, gig workers, and freelancers.