While the nation’s economy is being rocked by the coronavirus (COVID-19) outbreak, Ohio’s state legislature has once again failed to pass legislation to correct the funding problems of its state unemployment insurance trust fund. The State’s most recent effort (in 2018) to shore up its trust fund resulted in an increase in the taxable wage base paid by employers and a freeze on benefits paid to jobless workers. That effort is not enough according to the federal government.
According to the U.S. Department of Labor’s most recent State Unemployment Insurance Trust Fund Solvency Report, Ohio has only a third of the $3 billion it needs to handle a rush of unemployment claims if another recession hits. Ohio has the fifth-worst solvency rate in the nation with only California, Massachusetts, Texas and the Virgin Islands ranked lower.
The Ohio legislature is controlled by one political party, but the leadership of that party has not been able to agree on a fix. One lawmaker even expressed doubt that the state needs to properly fund unemployment at all.
“If there isn’t enough money in the fund to pay claims, the state can borrow from the feds at a rate of less than 1%. Does it make sense to take money out of the economy and place it in storage with Ohio government or to borrow at an almost negligible rate if claims exceed the fund reserves?” House Speaker Larry Householder told The Columbus Dispatch.
If the state does have to borrow money from the federal government, that money will most likely be passed onto employers in the form of unemployment insurance tax surcharges as was the common practice during the Great Recession where a majority of the country’s 50 states were forced to shore up their unemployment funds with federal dollars.
Even though the country has seen stable economic growth for over a decade, only 22 states have reached solvency in preparation for the next economic downturn or a spike in the need for benefits. According to the federal government, Ohio hasn’t met minimum safe levels since 1974.
Nonprofits Don’t Need To Worry About Unemployment Taxes
501(c)(3) do not need to worry about state unemployment insurance tax increases. 501(c)(3)s do not have to pay state unemployment insurance taxes – high or low. Many nonprofits could save as much as 30 percent or more on their unemployment costs by opting out of the unemployment insurance tax system – an advantage provided to them by the IRS. Doing so affords nonprofits unique avenues that allow them to strategically handle unemployment claims administration and unemployment insurance taxes in ways that for-profits can only dream about.
Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.