The coronavirus (COVID-19) continues to impact the missions and communities served by nonprofits. Below are some of the most frequently asked questions 501(c) Services has responded to concerning this pandemic.
Many of the questions and answers listed are generic as more state specific issues can only be handled on a case-by-case basis. Employers are encouraged to monitor their state governments for continued changes to these and other issues related to the COVID-19 outbreak.
Clients of 501(c) Services should feel free to direct their questions and concerns directly to us here.
COVID-19 Related Unemployment Benefits FAQs
Yes. Be aware. While “imposter” or fraudulent claims are not uncommon, we have already begun to see imposter claims being filed related to the current pandemic. Employers should check claims as they become aware of them and flag any suspected fraudulent claims as such in their unemployment tracking systems (CaseBuilder). Employers should also be sure to remind their employees to be on the look out for scammers who may request social security numbers, credit cards numbers and other personal information while appearing to assist them with their unemployment claims. If identity theft is suspected, a police report should immediately be filed.
If your organization has to suspend or reduce operations, the impacted employees will be eligible based on their reason for separation, availability, ability, and seeking work criteria. Their monetary eligibility will be determined by their base period wages paid by ALL employers. The base period is usually the first four (4) of the last five (5) completed quarters, but some states use the last four (4) completed quarters.
If you are a reimbursing employer what happens if we are unable to reimburse the state for the charges paid out?
First and foremost, the state will continue to pay benefits to separated employees regardless of if the reimbursing employer is able to cover the benefit charges.
For organizations that are part of 501(c) Agencies Trust (we cannot speak to how other unemployment programs are operated), the state sends us all invoices for your unemployment claims paid. We audit and pay those bills out of our members’ dedicated reserve accounts. Once a member’s reserve account is exhausted, we will reach out to them with a special invoice for the difference, so that we can continue to make payments on their behalf. (All reserve accounts with 501(c) Agencies Trust are private accounts. We do not share, or pool, funds across organizations.) If we do not receive the additional funds from the member, we will return the state’s bill to them for direct payment. At this time and if necessary, the organization can work something out with the state directly (like a payment plan).
Since we are a reimbursing employer will our employees be able to collect unemployment benefits if we have to shut down for any extended period?
Your employees have nothing to worry about. If they are eligible for unemployment benefits, they will be able to collect them. Being a reimbursing employer has nothing to do with how unemployment benefits are paid to separated employees only how those organizations manage their obligations to the state for paid benefits.
How will COVID-19-related layoffs impact a reimbursing employer’s (pay-as-you-go / self-insured) state unemployment insurance (SUI) tax rate?
Reimbursing employers (organizations like the members of 501(c) Agencies Trust) do not have a SUI tax rate. They are simply reimbursing their state government on a dollar-for-dollar basis on actual unemployment benefits paid out to their former employees. In fact, technically their SUI “tax rate” is zero (0). Also, nonprofit reimbursing employers are automatically exempt from the federal unemployment insurance tax act (FUTA).
Anyone can file for unemployment regardless of whether they are full-time, part-time, exempt, non-exempt, etc. Eligibility is a separate issue.
Eligibility is based on 5 criteria. To collect unemployment, the individual must be available for work, able to work, actively seeking work, monetarily eligible, and separated due to no fault of their own (determined by the individual state’s guidelines).
If you have employees that become “underemployed” they can file for partial benefits. The state will determine their weekly benefit amount (WBA) based on the wages paid by all employers during the base period. This would be their full WBA if they were totally unemployed. The employee then reports any wages earned each week to the state and they offset these wages and reduce the benefit amount, leaving a partial benefit. The formula for determining the amount they offset varies by state.
The provisions on this issue vary by state. Report all special pay when responding to the claim and allow the state to make the determination of whether they deduct it from benefits. The employee is also required to report this information.
Some states have a waiting week and some do not. In states with a waiting week, the individual will not receive any benefits for the first week they claim benefits. Some states are waiving the waiting week for COVID 19 related claims. Please check your individual state’s website for information.
This varies by state but usually ranges anywhere from 13 – 26 weeks. Check your specific state’s website for state specific information.
This will vary by state and the information is still forthcoming on how the various states will handle this. Please check your individual state’s website for the most current information.
Online is the quickest and easiest way to file. Every state has this option.
Some states offer something called a workshare program. Instead of laying off a group of employees, it allows an employer to keep employees working with reduced hours. Partial unemployment insurance benefits are then paid to employees to assist with lost wages. The amount of the weekly unemployment benefits that employees receive is normally calculated as a percentage of the hours/wages that have been reduced. As a reimbursing employer, you would be liable for these unemployment benefits.
The employer must apply to participate in their state program; an employee is not allowed to apply individually. Each state has its own application and requirements as to what information is needed. Once approved by the state, the employer normally completes the forms and provides the weekly claim information requested and submits it to the state directly for each employee. It works very similar to traditional partial benefits, except the employer is taking on the responsibility of the weekly reporting for the employees. The charging mechanism is the same as with traditional filing.
Please note: Employees who participate in a workshare program will still be eligible to receive the additional $600 a week until the end of July that is part of the recently passed CARES Act along with the partial benefit they will be paid on a weekly basis.
COVID-19 Related Human Resources FAQs
Is it appropriate to recommended certain employees stay home because of age and health issues and have the remaining healthy staff continue to work? (Added 03/30/20)
It’s a slippery slope when employers select employment actions based on someone’s age and health. Such actions could be considered as discrimination. It is better to have employees self-select. Document the new policy and process for allowing employees to not work due to COVID-19.
If you have employees that are choosing to stay home just because they are nervous, they can access their accrued unused benefit time. Not working because of this fear, typically, will not qualify them for unemployment compensation.
The FFCRA applies to all employees who have worked for you for 30 or more days. Leave due to Coronavirus (COVID-19) falls under FFCRA. All other typical FMLA requests still fall under regular FMLA and all rules apply. Example: Pregnancy, surgery for a broken arm, etc.
In some cases, you can. We suggest that employers work with their benefits broker to determine if their health insurance plan allows for this expansion of coverage.
Can you force employees to use their sick and vacation if they get sick versus going on leave without pay? (Added 03/30/20)
When it comes to COVID, employees taking leave covered by the Families First Coronavirus Relief Act (FFCRA) may not be required to use existing paid time off before using the emergency paid sick time provided under the law. In addition, employees may choose to use available paid time off during the first 10 days of leave under the Emergency Family and Medical Leave Expansion Act to care for a child whose school or place of care is closed; however, an employer cannot require an employee to do so.
Employers should send home all employees who worked closely with that employee over the past 14-days to ensure the infection does not spread. Before the employee is sent home, ask them to identify all individuals who worked in close proximity (three to six feet) with them in the previous 14 days. Send those individuals home as well.
When sending the employees home, DO NOT identify by name the infected employee or you could risk a violation of confidentiality laws. You should also take appropriate action to clean any affected work areas. If you work in a shared office building or area, you should inform building management.
Can we ask an employee to stay home or leave work if they exhibit symptoms of the COVID-19 coronavirus?
Yes, you are permitted to ask them to seek medical attention and get tested for COVID-19. The CDC states that employees who exhibit symptoms of influenza-like illness at work during a pandemic should leave the workplace. The EEOC allows for advising workers to go home and doing so is not considered disability-related if the symptoms present are akin to the COVID-19 coronavirus.
Employees are only entitled to refuse to work if they believe they are in imminent danger. OSHA defines “imminent danger” to include “any conditions or practices in any place of employment which are such that a danger exists which can reasonably be expected to cause death or serious physical harm immediately or before the imminence of such danger can be eliminated through the enforcement procedures otherwise provided by this Act.” OSHA defines imminent danger as where there is “threat of death or serious physical harm,” or “a reasonable expectation that toxic substances or other health hazards are present, and exposure to them will shorten life or cause substantial reduction in physical or mental efficiency.”
A furlough is a mandatory, temporary, unpaid leave from work. Employees will come back to their jobs when the employer notifies them that the leave has ended. A layoff can be temporary or permanent. Employers may also consider reducing the daily hours of some employees.
If the employer furloughs or temporarily lays off employees, are there any notification requirements?
Sometimes. When you place employees on furlough or conduct a layoff, WARN (Worker Adjustment and Retraining Notification) and state WARN statutes may require employers to provide advance notification to employees and government officials in certain situations. Not all layoffs trigger these requirements and exceptions may apply. Temporary layoffs of less than six months are not considered to be employment losses under WARN, and the same is true under many state WARNs. The size of the layoff also matters. Fed WARN is not triggered unless there are a minimum of 50 employment losses at a single site of employment in a 90-day period. State WARNs can be triggered at lower levels.
It is not currently clear that WARN statutes are being waived due to the current pandemic.
Some employers may want to require their employees to use their accrued vacation time or PTO during a furlough to reduce the organization’s liability. Employers may also give the option to use vacation time to supplement pay. Certain state laws may restrict use of accrued time off while on furlough. Employers should consider making the use of accrued time off voluntary – if the state allows it.
(Organizations with unlimited leave benefits should have a rule in their leave policies that says how long an employee can be on leave while on furlough. If your policy does not explicitly state these restrictions, consider establishing limits via a policy statement communication immediately to your employees.)
Furloughed employees have the right to seek new employment and may consider taking temporary jobs while on furlough. If you have a company policy in place about outside employment, be sure to let your furloughed employee know if you will enforce the policy and if yes, explain the policy to them.
COVID-19 Related Legislative FAQs
The 50% relief currently provided by the CARES Act is not going to be enough to protect nonprofits from devastating costs if they’ve furloughed all or most of their workers during the current shelter-in-place orders. Together with industry partners, we’ve been advocating that additional help for reimbursing nonprofits be included with other provisions to help vulnerable nonprofits in the next federal relief bill. For more on this topic, and to find out how you can help by notifying your congressperson to show support, please see this article.
Obviously, if you can find a way to avoid furloughing your employees, that will be the best solution for everybody. For small nonprofits, the most flexible program we’re aware of is a forgivable Small Business Administration 7(a) loan through the Paycheck Protection Program (PPP). We strongly encourage you to talk to your accountant and an SBA-approved lender to see if your nonprofit qualifies.
For a list of other possible resources, see the question “What other federal assistance might I be eligible for?” below.
The CARES act (Section 2103) includes an offer by the federal government to pay for 50% of the unemployment benefits charged to reimbursing employers from March 13 – December 31, 2020. This relief extends to all unemployment charges, not just COVID-related charges.
The Department of Labor has advised states that they must first collect 100% payment from the nonprofit before the state will be reimbursed for 50%; it is expected that most states will follow this same model and demand payment up front from the nonprofit, with refunds later. It’s not clear whether the reimbursement will come in the form of cash or credit. (This may vary by state.)
We will update this FAQ if we receive additional information.
Some states have offered relief of charges to reimbursing nonprofits for claims that are related to COVID-19. We can expect each state to have different eligibility requirements, duration, and procedures, so it’s impossible to generalize further.
Based on the information available to us so far, we believe the following states have offered some sort of relief of charges to reimbursing employers:
- New Hampshire
- Pennsylvania (if employer paid solvency fee for 2020)
We’re aware of other states that are rumored to have promised relief of charges, but we’re still looking for official confirmation that any relief will apply to reimbursing employers (in other words, is not restricted to taxpaying employers only). This list will be updated when we acquire new information.
The extra $600 per week in the CARES Act is formally referred to as “Federal Pandemic Unemployment Compensation” (Section 2104). To qualify, an individual must be unemployed specifically due to COVID-19, and the state must have signed an agreement with the federal government. In this circumstance, the individual will collect an extra $600 per week, and the federal government will reimburse the state for that money.
The start date for this provision will vary by state, because each state must sign an agreement. The end date is July 31, 2020.
This provision should theoretically have no effect on reimbursing nonprofits, but we have not yet seen any invoices to confirm this.
The federal government is offering to pay for the first week of unemployment benefits, if the state does not require a one-week waiting period (Section 2105). For some states, this will require a change in current regulations, which could delay their ability to receive this funding.
The start date for this provision will vary by state, because each state must sign an agreement. The end date is December 31, 2020.
However, we don’t know the mechanics of this law, and in particular we don’t know whether it will be implemented in a way that is invisible to reimbursing nonprofits. We are still researching this issue.
Ordinarily, unemployment benefits can only be collected for 26 weeks or less, depending on the state. Section 2107 of the CARES Act adds an additional 13 weeks of coverage (“Pandemic Emergency Unemployment Compensation”). This coverage comes after the claimant has exhausted all regular benefits available in the state, and before any “extended benefits” if available (see below).
This provision is retroactive to July 1, 2019, which means that some employees who had previously exhausted their available benefits will immediately be eligible for the additional 13 weeks. However, availability will have to wait until the state first signs an agreement.
The federal government has offered to reimburse the state for these benefits if the state enters into an agreement. However, we don’t know the mechanics of the reimbursement, and in particular we don’t know whether it will be implemented in a way that is invisible to reimbursing nonprofits. We are still researching this issue.
Extended benefits are a regular provision of unemployment law that is triggered when a state experiences an increase in unemployment, providing additional benefits beyond the standard 26 weeks or less permitted by the state for one claimant. Normally, reimbursing employers would be expected to pay 50% of these extended benefits, but the Families First Coronavirus Response Act (FFCRA) provides that the federal government will pay 100%, until December 31, 2020.
The CARES act, which was passed after the FFCRA, added an additional 13 weeks of benefits to the standard 26, and clarified that all 39 weeks must be exhausted before a claimant becomes eligible for extended benefits.
Note that this grant by the federal government is conditional on the state experiencing at least a 10% surge in unemployment costs, and also on specific actions that the state must take to be in compliance with the act. We don’t know exactly how this provision will be administered or which states will take advantage of it, but a similar law was enacted during the last recession, and after some initial hiccups, it was eventually administered consistently in a way that was invisible to reimbursing nonprofits.
If you’re a reimbursing nonprofit, you should be aware that you may be charged for unemployment benefits based on the number of hours by which a person’s job was reduced. Beyond that statement, however, work sharing is beyond the scope of this FAQ due to the many state-specific regulations that govern it.
If you are a client of 501(c) Services, including members of the 501(c) Agencies Trust, you may call for a consultation if you are considering a work share program.
We don’t claim expertise in this area, but we’ve collected the following list of suggestions from around the web:
- Small Business Administration Loans and Assistance:
- SBA 7(a) loan: Under some conditions, you can receive an SBA 7(a) loan to cover payroll costs, and have the loan forgiven by the federal government. For more information visit: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
- SBA Economic Injury Disaster Loans and Disaster Grants: www.sba.gov/funding-https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businessesprograms/disaster-assistance
- Nonprofits with 500-10,000 employees may qualify for special Economic Stabilization Loans. These have not yet been set up, but a summary is available here: CARES Act Summary – Title IV—Economic Stabilization and Assistance to Severely Distressed Sectors of the U.S. Economy (bottom of page)
- Consult with an accounting/tax professional to see if any of these apply to you:
- Employee Retention Credit
- Employer Payroll Tax Deferment
- Tax Credit to offset Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave:
- Small Business Administration Loans and Assistance:
- Extra funding has been set aside for these programs. Consult with the relevant state agency:
- Child Care Development Block Grant (CCDBG)
- Head Start
- Child Nutrition Programs
- Housing and Homeless Assistance
- Extra funding has been set aside for these programs. Consult with the relevant state agency:
If you’re reading this FAQ, this probably doesn’t apply to you. But if your organization is a church or closely affiliated with a church, or a very small nonprofit (less than 4 employees for less than 20 weeks per year), you may have some employees who are not ordinarily covered by the unemployment system. In this case, section 2102 (“Pandemic Unemployment Assistance”) of the CARES Act may apply to your employees.
Unfortunately, guidance related to this provision is beyond the scope of this FAQ. We expect the implementation of this provision to be both challenging and chaotic at the state level, due to a lack of information from which to calculate weekly benefit amounts, and computer programming that may not be prepared to accommodate this situation.
COVID-19 Related 501(c) Agencies Trust FAQs
I usually fax over our quarterly wage reports to 501(c) Agencies Trust. Since my office is now working from home, is there an email I can use instead? (Added 04/20/20)
Yes. Please email your quarterly wage reports to email@example.com.
Do my payments to 501(c) Agencies Trust count as payroll costs for the purpose of the CARES Act / SBA Payroll Protection Program? (Added 04/03/20)
This is outside our expertise, so we can’t say yes or no. However, we can help to clarify the questions you should be asking yourself or your accountant:
- First, we feel confident that the payments you make into your Trust account would not qualify, because the money in your Trust account remains legally your money while it is held by the Trust.
- However, the money we pay out of your Trust account to reimburse your state for unemployment benefits might qualify. The legal codes usually refer to this as “payment in lieu of contributions,” meaning “in lieu of contributions to the state unemployment fund.” Because the standard contribution to a state unemployment fund is clearly a payroll tax, the key question is whether a payment made in lieu of such a payroll tax also qualifies as a payroll cost for the purpose of a PPP loan. We haven’t been able to find a statement or ruling on this issue.
- If you would like a summary of the recent payments made out of your Trust account, we are happy to provide that.