Unemployment Insurance

1. Unemployment Insurance The conference will begin shortly. To hear the audio portion of this presentation, please dial: 1-866-740-1260 Passcode 2792966 A Webinar Exclusively for Arizona Nonprofit Organizations In partnership with:

2. First Nonprofit Group • An AmTrust Financial Company • Based in Chicago, Illinois • Our State Unemployment Insurance (SUI) programs serve more than 1,600 nonprofits across the country, covering in excess of 300,000 employees.

3. FNG National Nonprofit Partners

4. Financing Options Available for SUI • Two ways to satisfy SUI obligation • Through the state tax fund (2014) • Pay assigned rate on the first $7,000 per employee • Minimum Rate = 0.03%, Maximum Rate 7.17% • From $2.10 to $501.90 • Paid on quarterly basis • Become a “Reimbursing” employer – Two options • Self-insure one’s unemployment benefits • State issues a bill to the employer at the end of each quarter for claims paid to former employees • Risk pool, trust, or insure through 3rd Party

5. Pros and Cons of the SUI Tax Fund • Advantages • Fixed annual cost • No risk beyond assigned tax rate • Disadvantages • The solvency level of fund sets rates • Socialized costs • Costs can increase even if experience improves • Added strain on cash flow as a majority of tax liability paid by mid-year

6. What is Reimbursing? • Organization is financially responsible for reimbursing the state dollar-for-dollar on former employees’ unemployment claims. • Advantage • Lower cost • Disadvantages • No limit to aggregate annual costs (self-insured or 3rd party plan without cap) • Max individual claim = $6,240 ($240 per week x 26 weeks) • Inability to accurately budget for cost (self-insured) • Exposure to severe fluctuation in costs (self-insured) • Loss of certain protest rights (all reimbursing employers) • Must track credits due (all reimbursing employers)

7. Forward Thinking: Getting Prepared to Address the Rising Costs of Unemployment Insurance

8. A Quick Look at Arizona’s Unemployment UNEMPLOYMENT (number of unemployed) June 2011 Unemployment: 290,407 (9.5%) June 2012 Unemployment: 253,777 (8.4%) June 2013 Unemployment: 243,443 (8.1%) June 2014 Unemployment: 210,367 (6.9%) Dec. 2010 Trust Fund Balance: -$236 Million Dec. 2011 Trust Fund Balance: -$361 Million Dec. 2012 Trust Fund Balance: -$312 Million Dec. 2013 Trust Fund Balance: $26 Million

9. SUI Fund – Average Cost Per Employee • Arizona • 2009: $ 93 • 2010: $140 • 2011: $155 • 2012: $165 • 2013: $165 • Target: $244

10. Path to Solvency • U.S. Department of Labor (Passed) • Solvency standards to qualify for Title XII, effective 1/1/14 • Current balance of Arizona UI Trust Fund = $4,568,726 • Balance required to meet initial standards = $85,051,866 • Ineligible for Interest Free Reinsurance Program • State of Arizona HB 2173 (Passed) • Authorization to issue $200M in bonds to repay Federal Loan • Administration’s proposal • Increase Federal UI Taxable Wage Base to $15,000 in 2017 • Currently $7,000 • SUI Taxable Wage Base must meet federal minimum • Index Federal UI Taxable Wage to average annual wage • If indexed today, UI Taxable Wage base would be $16,600

11. Unemployment Products Meeting the Needs of Nonprofits

12. Unemployment Products • Bonded Service Program • Unemployment Savings Program Must currently have reimbursing employers status or convert to reimbursing status to participate!

13. Bonded Service Program Features • Fully insured program • First and last dollar coverage • Premium set at % of gross wages • Fixed annual cost • Precise allocation to fund source • Budgetary certainty • Potential Experience Credit/Refund • Maximizes cash flow • Billed in equal quarterly installments • Claims administration service • On-site education and training • Benefit charge auditing • Comprehensive claims counseling • Hearing representation

14. Unemployment Savings Program Features • Proprietary reserve account • Only responsible for organization’s own claims (no pooled/shared risk) • Fixed annual deposit (the insured owns the balance) • Stop loss insurance • Protects organization from unforeseen layoffs or excess loss • Interest bearing reserve • Average investment return = 4.14% (2004-2013) • 2013 = 5.60% return • Administrative costs • Covers stop loss insurance, management fee, commission and claims administration • Maximizes cash flow • Billed in equal quarterly installments • Claims administration services • Handles all correspondence with state on member’s behalf • Benefit charge auditing • Claims counseling and hearing representation

15. Unemployment Claims Service Includes: • Audit of Benefit Charges • Benefit awards, claims duration, and liability for accuracy • Ensure credits are received • Audit charges to wages paid to detect fraud • Claims • Process all separation data and unemployment claims • Review, prepare arguments, and protest decisions as needed • Attend all unemployment hearings • Technical services • Review personnel policies and procedures (all hiring and separation) • Provide educational workshops for management and supervisors • Customized claims activity reports • Online access • Individual claim status reports

16. The Claims Process Claim filed at local unemployment insurance office by employee Claim notice generated to the employer Reconsideration by adjudicator or hearing scheduled Verbal and written communication with the local office adjudicator APPEAL FILED Unemployment hearing at which testimony is presented on the issued appealed Board evaluates hearing transcript APPEAL FILED Decision(s) issued to both parties by the local office adjudicator on relevant issues Decision issued – end of administrative process Decision sent by mail to both parties CLAIMS PROCESS ENDS CLAIMS PROCESS ENDS* CLAIMS PROCESS ENDS * Further appeal to circuit court and higher can be initiated by the claimant or employer’s legal counsel.All claims may not go this far in the process. Our procedure is to advise the employer if the further appeal is not warranted on questionable loss decisions. 16

17. Savings Samples

18. Case Study • Since 2005, a First Nonprofit Group member providing child care and educational services has saved over $100,000 on it’s unemployment insurance costs. •  What does a $100,000 savings translate into? More money for your cause! SUTA First Nonprofit Group

19. Savings • 2014 members saved an average of $41,473 on their unemployment costs • Through our partnership with the Alliance of Arizona Nonprofits, our Arizona members have saved over $1 million!

20. Info for Quote

21. How to Receive a Quote?Arizona All employers: • Complete application form (two pages) • Four most recent State Quarterly Wage Filing (UC-018) forms – Summary page only Taxpaying employers: • 2012, 2013, and 2014 “Determination of Unemployment Tax Rate” forms • 7/1/11 – 6/30/14 “Benefit Charge Notice” forms Reimbursing employers: • 12 Most recent “Benefit Charge Notice” forms Fax all info to 312-239-8368.

22. Quarterly Wage Filing

23. “Determination of Unemployment Tax Rate”

24. “Benefit Charge Notice”

25. State Requirements to Convert from the State Tax Fund to Reimbursing • 501(c)3 IRS certificate • Letter of intent • Timing • All paperwork must be submitted before November 30th • Conversion effective January 1, 2015

26. Thank You! Beth Quynh Regional Sales Director First Nonprofit Group An AmTrust Financial Company www.firstnonprofitgroup.com Phone: 214-360-2477 Beth.Quynh@firstnonprofit.com