Unemployment Relief for NonProfit Employers

On August 3, 2020, the President signed into law the “Protecting Nonprofits from Catastrophic Cash Flow Strain Act (S.4209)”.  The purpose of the act is to ensure that nonprofits, state and local governments, and federally recognized Tribes that operate as reimbursing employers under state unemployment insurance (UI) systems can receive the UI relief secured through the CARES Act without bearing onerous cash flow burdens that threaten liquidity.

Who Does This Affect?

Nonprofit organizations, state and local governments, and federally recognized Indian Tribes who have opted for the reimbursing method of financing through the state unemployment system. This means that reimbursable employers make “payments in lieu of contributions” to finance benefits attributable to them. State Unemployment Agencies then bill reimbursing employers for benefits paid out during that period to their former employees. For every $1 paid to a claimant under their State Unemployment Insurance account, the employer reimburses the state for that $1. Reimbursing employers do not pay unemployment insurance payroll taxes.

CARES Act History

Sec. 2103 of the CARES Act was intended to provide emergency relief to reimbursing employers by federally financing 50% of the UI obligations for these employers for the period beginning March 13 and ending December 31. However, as interpreted by the Department of Labor (DOL) in guidance issued on April 27, reimbursing employers “must pay their bill in full” before they can receive reimbursement for one-half of their obligation. For many employers, the requirement to pay 100% of the UI bill before securing relief exacerbates the financial impact of historically high claims triggered by the pandemic, increasing the risk of further layoffs, closures, or substantial reductions in services.

How Protecting Nonprofits from Catastrophic Cash Flow Strain Act (S.4209) Assists Reimbursable Employers

This legislation enables states to provide the CARES Act’s 50% emergency relief to reimbursing employers without requiring these nonprofits or other entities to pay their full bill first. While the net cost to the employer and the federal government remains the same, as the employer is still responsible for paying 50% of its bill and the federal government will still finance the remaining 50%.  For states that have already begun administering Sec. 2103 relief under current law requirements, the legislation includes an explicit safe harbor for claim weeks prior to the date of enactment.

*Certain states have expanded state noncharging for COVID-19 related claims to include reimbursable employers. Please check the CCC COVID-19 UI Guide to see if your state is included.

Other Relief for Reimbursable Employers

The Texas Workforce Commission (TWC) recently announced they are extending the 2nd Quarter 2020 payment deadlines for reimbursable employers from August 31 to December 31, 2020.

Because the deadline for payment has been extended, no interest or penalty will accrue for the 2nd quarter payment during this extended deadline. This extension does NOT eliminate the required reimbursing payment and any previously established interest and penalties will continue to accrue.

TWC’S action is intended to provide more time for you as a reimbursing employer to secure resources to meet these and other liabilities as you deal with the impact of COVID-19.

Employers are still required to submit a timely 2nd quarter wage reports by 07-31-20 to ensure accurate processing of unemployment claims.

There is pending legislation to provide relief for reimbursable employers, Protecting Nonprofits from Catastrophic Cash Flow Strain Act of 2020, which has been passed by Congress is currently awaiting signature by the President. As well, the federal CARES Act provided a provision that reimbursing employers would receive 50% reimbursement for their bill, which TWC is working to implement later this year.

Check CCC’s COVID page for our frequent updates. CCC will continue to monitor the ongoing legislation and provide updates.


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