Many nonprofits, along with governmental and tribal organizations, self-insure for unemployment claims. Self-insured employers (also called reimbursing employers) reimburse the state dollar-for-dollar when a former or furloughed employee files for unemployment benefits.
The federal CARES Act includes a reimbursement for self-insured nonprofits for half (50 percent) of the costs of the benefits provided to their laid off or furloughed employees, and the Minnesota Council of Nonprofits (MCN) has been very actively advocating that Congress increase that reimbursement to 100 percent of costs.
Unfortunately, the U.S. Department of Labor (DOL) issued guidance (UIPL 18-20) on April 27 on how states can implement this section of the CARES Act, and the guidance is the opposite of what nonprofits need.
The DOL guidance cuts against the intent of this CARES Act by:
1. Instructing states to bill reimbursing nonprofit employers for 100 percent of the costs of unemployment benefits paid to employees laid off as a result of the COVID-19 pandemic.
- Nonprofits would then seek reimbursement from their state Unemployment Insurance (UI) trust fund for 50 percent of the reimbursement. It appears that this guidance was based on Section 2103 of the CARES Act, which requires funds to be used to “reimburse” self-insured nonprofits, but goes against the intent of the CARES Act.
2. Penalizing states that try to provide additional assistance to these nonprofits.
- It is unclear exactly how this portion of the guidance would affect Minnesota. It will have the most effect on states that have chosen to provide 100% relief for reimbursing employers, which Minnesota has not done.
Fortunately, the Labor Department is backpedaling from the guidance, under pressure from MCN and others, including the National Council of Nonprofits. In addition, MN DEED is very open to conversations about how this guidance could be implemented in our great state to do the least harm to nonprofits.
The Labor Department has already revised other guidance it has recently issued, and we are advocating that they do the same with this guidance.
Please continue to connect with your Members of Congress! The main ask continues to be that Congress increase relief for reimbursing employers from 50% to 100% in the next relief package.
In addition, urge them to amend Section 2103 of the CARES Act to replace the word “reimburse” with “reduce the costs of” so it is clearer that states need not have self-insured nonprofits seek a partial reimbursement of a reimbursement.
Please continue to stay tuned to MCN’s COVID-19 resource page and social media for updates and news related to this important issue.