Blocher-Rubin: Potential adverse impact of unemployment claims on self-insured nonprofits

By Aaron Blocher-Rubin
Posted 4/27/20

During these uncertain times, the economic impact of coronavirus-driven cancelations, postponements and shutdowns continues mounting.

This is especially daunting for many nonprofit organizations …

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Blocher-Rubin: Potential adverse impact of unemployment claims on self-insured nonprofits

Posted

During these uncertain times, the economic impact of coronavirus-driven cancelations, postponements and shutdowns continues mounting.

This is especially daunting for many nonprofit organizations whose financial struggles were exacerbated by fund-raising dollars that disappeared along with galas and other events.

The situation is made worse for nonprofits that self-insure for unemployment insurance and, through no fault of our own, were forced to lay off or furlough employees now filing for unemployment benefits.

Self-insuring nonprofits are required to reimburse the state for the temporary benefits provided through unemployment insurance claims. The potential impact is even greater now with loosened unemployment eligibility rules and substantially increased payments, meaning more people are filing and are incentivized for extended periods.

“At a time when nonprofit organizations are still providing direct services in response to the COVID-19 pandemic, they will need additional relief from the significant financial burden caused by unemployment claims in order to provide some continuity of relief,” Kristen Merrifield, CEO at the Alliance of Arizona Nonprofits, wrote to Gov. Doug Ducey, urging him hold self-insured nonprofits harmless from this financial burden.

For my organization, Arizona Autism United, a self-insuring nonprofit as allowed under a 1972 amendment to the Social Security Act, the impact is, at least today, undetermined. That change in 1972 was based on the concept that most nonprofits lay off fewer employees than for-profit employers and self-insuring provides benefits including cost savings and better financial control. That was seen as a public good so that more funds would support charitable missions. It’s also why for-profits are not given the option to self-insure.

Unfortunately that leaves nonprofits disproportionately affected by the expansion of benefits, which in all other ways is positive for our community. Devastating the nonprofit sector financially, however, threatens the community safety net.

Because this happened so quickly, we cannot yet assess the impact. It’s possible we could see hundreds of claims.

A majority of our 300 employees are direct-care providers working with children and families in their homes. Right now, many families are putting services on pause or employees are choosing to take a leave for their own health concerns. Others have reduced hours if they work with multiple families. There is no way to know who is going to get approved for unemployment, how much it will cost us and how long it will last.

Under the current rules, a nonprofit responsible for 100 employees getting full unemployment benefits would be looking at costs of $312,000.

I can only imagine the devastating impact for nonprofits in more difficult circumstances. This simply wasn’t the intent of the self-insured program.

CEO Merrifield cited the governor’s “thoughtful response to the COVID-19 pandemic in Arizona” and initial steps to provide relief to nonprofits, including the CARES Act (Coronavirus Aid, Relief and Economic Security) provision to forgive one half of the reimbursements owed by self-insuring nonprofits.

She asked the governor to do more.

“All of these are helpful steps,” she wrote. “However, it is essential that additional measures recognize the still-enormous financial hardship faced by these organizations, particularly as we rely on their services to respond to this crisis.”

CEO Merrifield asked for consideration to:

  • Allow full forgiveness of COVID-19-related claim reimbursements owed by self-insured organizations, and to “ensure that Arizona is prepared to receive and apply the federal funds to cover half the costs of COVID-19 related claims for self-insured nonprofits,” and
  • Provide automatic repayment deferments of at least 120 days for “immediate relief to charitable organizations” and to “relieve the Department of Unemployment Assistance from managing individual employer requests for deferments in their quarterly payments.”

On behalf of nonprofit organizations doing great work in every community in Arizona under terribly stressful circumstances, we encourage you to ask the governor to take steps to relieve the additional financial pressure so we can continue serving individuals and families who need our help now more than ever.

Aaron Blocher-Rubin
CEO
Arizona Autism United

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