Relief for Nonprofits Self-Insuring Unemployment Benefits

Many orchestras are among nonprofits that self-insure unemployment benefits rather than pay state unemployment taxes. Under the CARES Act, the federal government makes payments to states to reduce nonprofit liability to 50% of the costs they incur through December 31, 2020 to pay unemployment benefits, which was extended through March 14, 2021 in the December relief package. Under the American Rescue Plan, the 50% coverage will continue through March 31, and starting April 1 federal relief would cover 75% of nonprofit liability, available through September 6, 2021. Original guidance from the U.S. Department of Labor indicated that states must first bill nonprofits for 100% of the costs, payment must be made to the states by nonprofits, and only then would the 50% reimbursement be issued to the nonprofit by the state.

On August 3, the “Protecting Nonprofits from Catastrophic Cash Flow Strain Act” (S. 4209) was signed into law, requiring states to only bill nonprofits for 50% of liability. This legislation is one of many requests the League and the larger nonprofit community (PDF) had been urging Congress to pass, in order to ease the burden of unemployment compensation costs for self-insured nonprofits. While eliminating the requirement for nonprofits to pay 100 percent upfront is a partial victory, advocates continue to make the case for federal relief to cover 100 percent of costs.

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