Better manage unemployment as a 501(c)(3) by understanding the guidelines of each state.
Last Updated: December 2022
Employer pays one-time 0.2% cash deposit directly to the state.
Some states require employers purchase a bond when they become a reimbursing employer. This bond is held in trust to ensure the employer properly manages their unemployment claims responsibilities.
The U.S. Department of Labor has standards that are used to determine is a state’s unemployment insurance fund is healthy enough to weather an economic downturn and assigns a grade. Often state programs receive failing grades.
Every state annually incorrectly overpays unemployment benefits to claimants. States and employers do not always catch these overpayments. Those that are discovered are tracked by the DOL.
Nonprofits leaving the state unemployment program to become reimbursing employers in “lag” states receive an additional first year financial savings. Lag states have a “lag” (delay) in billing new reimbursing accounts for claims, which means claims charges in the first year after the switch will continue to be paid out of the original unemployment tax account.
Each state has periodic deadlines when eligible employers may enter or exit the state unemployment insurance program.
Every state assigns a minimum and maximum payroll tax for unemployment. Employers are assigned a floating rate between the minimum and maximum based on their experience rating. The figure assumes the employee earns the minimum of the state’s taxable wage base.
The taxable wage base is the maximum amount of employee earned income on which employers must pay unemployment taxes.
Under the Social Security Act, when a state unemployment program becomes insolvent the state is required to borrow money from the federal government – allowing unemployment benefits to continue. The loan is often paid back with interest charged to state employers via tax surcharges.