As nonprofit organizations look for ways to reduce operating budgets and increase funds, more groups are opting out of their state unemployment tax system and realizing significant savings.

Rather than pay the state unemployment taxes, a nonprofit organization may join a trust such as the Unemployment Services Trust (UST) and make regular contributions. UST maintains separate accounts for each member, safely manages assets, and reimburses the state for unemployment claims.

Members of the Trust save because they no longer subsidize for-profit companies that have higher unemployment claims and frequent seasonal turnover as part of the state system. However, savings vary depending on the strength of the unemployment trust. The Unemployment Services Trust, which has a long-standing reputation, guarantees Colorado Nonprofit Association members a 50 percent savings in the first two years of participation.

In subsequent years, the amount each member of the Trust contributes is actuarially determined, based on the organization’s own experience as well as the overall experience of the trust. Overall, most nonprofits continue to save 30 percent on their unemployment taxes. Nonprofits have found this to be a significant increase in available funds.

Member Benefits

The success of unemployment trusts isn’t surprising since members get more than tax relief. For example, members of Unemployment Services Trust, which represents a broad geographic and demographic spectrum of the nation’s nonprofits, share administrative costs and avoid the cash flow exposure of self-insurance. UST also provides claims monitoring services, which saved member agencies more than $23 million in 2003. Member organizations also receive credits when funds are not needed to pay claims. The Unemployment Services Trust, with assets of more than $100 million, has awarded its eligible members an experience credit refund every year since 1986.

Considering your individual needs.

Most nonprofits realize savings with the Unemployment Services Trust. Organizations with 15 or more employees and a stable employment history may get the most benefit. However, if you do have employee turnover, a trust could still save you money if your employees typically leave for other opportunities and don’t file unemployment claims.

When you opt out of the state unemployment tax system, your organization agrees to stay out of the state’s system for a period of time. Colorado requires a two-year “sit out” time.

To learn more about the benefits of joining the Unemployment Services Trust, call Betsy Jansen at 303-894-0298 or 1-866-537-1142 to get a free information packet including a request for quote form. UST is a member benefit of the Colorado Nonprofit Association.