Employers received some good news on January 14, 2021, with an extra big bonus for certain nonprofit organizations that are self-insured for unemployment insurance. As part of the CARES Act, the federal government agreed to cover 50% of the unemployment responsibility for self-insured nonprofits. Now, based upon an order by Roberta Reardon, Commissioner of the New York State Department of Labor (DOL), New York State will pick up the tab for unemployment claims retroactive to March 9, 2020. All unemployment claims from March 9, 2020 through an undetermined date in the future will be charged against the NY State general account. What this means is that businesses will not see an uptick in their NY State unemployment rates due to turnover during the pandemic, and nonprofits that are self-insured will be made whole by the NY State general account.
From a cash flow perspective, effective immediately, self-insured nonprofits should stop making payments to NY State for unemployment claims. How NY State is going to reimburse agencies that have been paying the claims is uncertain at this point.
Nonprofits also need to consider the impact of this regulatory change on deficit funded contracts, cost reports, and PPP forgiveness, as it is no longer a cost that they have incurred. Organizations should establish a receivable for the projected amounts paid to the State that will be refunded.
Tania Quigley, CPA
Tania Quigley has been a member of Cerini & Associates’ audit and consulting practice area for ten years where she focuses on serving the firms nonprofit and employee benefit plan clientele. Tania has experience in performing financial statement audits and reviews, tax return preparation, cost report preparation and filing, retirement plan audits, and other consulting. Tania brings her expertise, diversified background, and helpful approach to all of her engagements.