Redpath Insights

What MN Nonprofits Need to Know About Unemployment Claims Right Now

by Cathy Lydon, CPA

April 29, 2021 - Employers across the country saw a dramatic surge in unemployment due to the COVID-19 pandemic and nonprofits were not spared, with around 40% of nonprofit employees filing unemployment claims as of a November 2020 report from the Minnesota Council of Nonprofits.

While Congress, state and local governments, and service providers move to provide relief for individuals and businesses affected by the coronavirus pandemic, many nonprofits are left wondering where they stand and how much they owe for unemployment benefits being provided to their terminated workforce. Here's what they need to know now.

How Much Will Reimbursement Account Holders Owe?

Nonprofit employers who've chosen the Reimbursable Account Option with Minnesota Unemployment Insurance (MNUI) are not responsible for quarterly unemployment insurance taxes, opting instead to pay MNUI directly for 100% of the unemployment funds MNUI provides to the nonprofit's former employees.

The low turnover rates and small number of unemployment claims typical of the nonprofit sector usually make reimbursement the lucrative option for nonprofits โ€“ but the rapid increase of claims following the COVID-19 pandemic saddled many nonprofits with large payments due to MNUI. This is important because each nonprofit's unemployment reimbursement responsibility has large implications for their liabilities in 2021 and beyond.

CARES Act Relief Extended Through March 13, 2021

Special provisions of the CARES Act offered relief to reimbursing nonprofits, including federal reimbursement for the first week of regular unemployment insurance benefits and benefits for nonprofits enrolled in the Shared Work program.

Per a March 2021 letter sent from the Minnesota Department of Employment and Economic Development (DEED) to reimbursing nonprofits, a number of these benefits have been extended to cover :

  • The federal government will reimburse DEED for 50% of the remaining balance of benefits charged to each nonprofit's reimbursement account between March 29, 2020, and March 13, 2021. Employers will not be required to repay the portion of unemployment benefit charges covered by the federal government.
  • The federal government will reimburse DEED for any Shared Work benefits paid for weeks between 3/29/2020 and 3/13/2021 to nonprofits enrolled in the Shared Work Program.  
  • The federal government will reimburse DEED for the first week of unemployment benefits paid to each applicant if that week fell between 3/29/2020 and 1/5/2021.

A Unique MN Statute Could Provide Additional Relief for Employers

Since the CARES Act was passed, MNUI has suspended billing for nonprofits with reimbursement accounts until Q2 2021. That means that as of this writing, no unemployment insurance bills will be sent to reimbursing employers before July 2021. Across the country, unemployment insurance providers are waiting for government agencies to assess each employer's eligibility for relief before resuming billing. That assessment is expected to take several months, and without additional guidance from MNUI and DEED, uncertainty over each nonprofit's financial responsibility has arisen.

In Minnesota, MNUI awaits DEED to review each employer's eligibility for relief under a unique state law. Minnesota Statute 268.047, subdivision 2(5) provides relief for charges for any employer that has had 25% or more of its workforce unemployed as a result of an act of nature (i.e., COVID-19). Per the MN Office of the Revisor of Statutes, unemployment benefits won't be calculated for reimbursement when:

(5) the applicant's unemployment from this employer was a direct result of the condemnation of property by a governmental agency, a fire, flood, or act of nature, where 25 percent or more of the employees employed at the affected location, including the applicant, became unemployed as a result. This exception does not apply where the unemployment was a direct result of the intentional act of the employer or a person acting on behalf of the employer ...

Conclusion and Next Steps

In mid-March 2021, DEED and MCN sent a letter answering key questions about nonprofit reimbursing organizations' unemployment insurance responsibilities. Among the updates, this letter clarified the following points:

  • Billing will remain suspended until Q2 2021. DEED says they will "likely turn billing back on in mid-2021," but not without warning you first.
  • MNUI is currently adjusting employer accounts, applying federal relief, and determining eligibility for additional state level relief. This process will likely take several months, after which reimbursing employers will receive a letter confirming its completion.
  • Each employerโ€™s letter will provide the dollar amount of total benefits charted to their account as well as the dollar amount of federally reimbursed charges by quarter. The amount of potential state relief under Minnesota Statute 268.047 will not be calculated โ€“ only each organization's eligibility for it.
  • MNUI is requesting that employers not reach out with questions on specific benefit charges until after theyโ€™ve had an opportunity to apply all financial relief.
  • The notice does not reflect any of the additional changes made under the American Rescue Plan (H.R. 1319), as DEED is waiting on official implementing guidance from the U.S. Department of Labor.

At Redpath, weโ€™ll remain in contact with the Minnesota Council of Nonprofits and DEED to monitor the situation and ensure our clients receive the information they need when they need it so they can make the smartest choices for their organizations in 2021.

COVID-19 CARES Act

Cathy Lydon, CPA

Cathy Lydon, CPA

Cathy Lydon is a director and leads the not-for-profit and governmental industry team at Redpath and Company. She has been in public accounting since 2004 and specializes in working with not-for-profit organizations. Cathy has extensive experience performing financial audits and Federal single audits in accordance with Uniform Guidance. Her audit experience also includes governmental entities, charter schools, healthcare, DEED Extended Employment Program Compliance audits, and employee benefit plan audits. Cathy has been a member of the Redpath team since 2008. Cathy is a holder of The Advanced Single Audit Certificate issued by the AICPA. The Advanced Single Audit Certificate requires the ability to evaluate and analyze the core concepts related to client acceptance, engagement planning, engagement analysis, concluding an engagement, and guiding principles for single audits at an advanced level as outlined in the AICPA Competency Framework: Governmental Auditing. Relevant continuing professional education includes the annual AICPA Not-for-Profit Industry Conference and the annual MNCPA Not-for-Profit Conference.

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