NORTH CAROLINA BEGINS DEBATE OVER BENEFITS AFTER UNEMPLOYMENT FUND REACHES SOLVENCY

By October 12, 2016October 19th, 2016Blog

The battle over proper unemployment funding and benefits continues in North Carolina. The state has reached the $2 billion mark for its unemployment insurance trust fund. That $2 billion mark is close to  recommended federal guidelines for a safe level of funding that may allow the state (U.S. Labor Department guidelines recommend $2.3 billion to $2.4 billion for a state the size of North Carolina) to pay benefits durning an economic downturn. The idea being that the state can fund its own unemployment program during a period of high unemployment without borrowing money from the federal government.

The announcement of reaching “solvency” was questioned by some unemployment advocacy groups. They believe the trust fund should be increased in order to manage any future recession.

The N.C. Justice Center said in a statement that employers have borne about 22 percent of the repayment burden, while beneficiaries have contributed 73 percent through reduced benefits.

According to N.C. Justice Center, North Carolina ranks 46th in average weekly benefits, providing just $241 each week on average to jobless workers and a fixed maximum of $350. This is despite the fact that the average weekly wage in the state is $888. The state is therefore roughly providing just 25 cents for every $1 earned, circulating far fewer dollars than recommended by economists who typically seek a replacement rate of at least 50 percent. Prior to 2013 changes to the state’s unemployment program, North Carolina ranked 25th with a wage replacement rate of 36.5 percent.

In order to repay its program’s federal debt, North Carolina cut its program’s maximum payout (from $530 to $350) and put UI benefits on a sliding scale from 12 to 19 weeks as the maximum and five to 12 as the minimum. The scales rise and fall with the state’s jobless rate.

Even though the program is once again “solvent,” there does not appear to be any move by the state legislature to put North Carolina’s program back in line with other state programs by increasing the benefits rate and time period workers are eligible for unemployment.

Nonprofits have options

The above applies to all North Carolina employers except 501(c)(3) organizations. 501(c)(3)s do not have to pay state unemployment insurance taxes – high or low. Many North Carolina nonprofits could save as much as 30 percent on their unemployment costs by opting out of the unemployment insurance tax system – 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.

Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.

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