New Jersey’s unemployment insurance trust fund returned to solvency in 2014 after reaching a peak deficit of $2.1 billion in 2011. It is now reportedly $1 billion in the black. That has state lawmakers including the governor signaling that unemployment insurance tax relief is on the horizon of employers.
“Working with the Legislature, we were able to reduce annual increases to save employers $1 billion in potential state taxes and instituted several antifraud reforms that have prevented hundreds of millions of dollars from being improperly diverted from the trust fund,” said Gov. Chris Christie during a press conference held at JPMorgan Chase Bank’s corporate center in Jersey City. “Today, the trust fund is now at full solvency, a move that will benefit New Jersey businesses in the long run because it is successful private-sector companies, not the government, that will grow our economy and create jobs.”
New Jersey employers will get a tax cut totaling $200 million later this year. The tax cut averaging roughly $48 per employee will begin July 1, and it’s the first of its kind in the state since 1998.
New Jersey is an example of a state that had a historically healthy unemployment insurance trust fund but then saw its resources syphoned away by lawmakers to the tune of $5 billion in lost reserves. Therefore when the jobless rate hit 10 percent in 2010 the state was forced to raise payroll taxes and borrow roughly $2 billion from the federal government to cover its unemployment insurance liability. A measure 30 other states were forced to take as well.
“Our job is to make it easier and more affordable to live and work here, not more expensive and more burdensome,” Christie said. “We want you to be able to support your families, that’s been our priority for the last six and half years.”
Nonprofits Have Other Options
The above applies to all New Jersey employers except 501(c)(3) organizations. 501(c)(3)s do not have to pay state unemployment insurance taxes – high or low. Many nonprofits could save as much as 30 percent on their unemployment cost, even with the coming tax cuts, by opting out of the unemployment insurance tax system all together – an advantage provided to them by the IRS. Doing so affords nonprofits unique avenues that allow them to strategically handle unemployment claims administration and unemployment insurance taxes in ways that for-profits can only dream about. Nonprofits that opt out of the state unemployment insurance tax system don’t have to worry about the peaks and valleys of the trust fund and its taxes – a strategic budgeting tactic that allows for better management of resources.
Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.