NJ State Unemployment Insurance Privatization for 501(c)(3) Organizations

Working with an unemployment provider to help cut down on operating costs and to protect cash flow is a smart choice. But how do you know which is right for you? Following are some important questions to ask potential unemployment trust partners.

Q: Is there an enrollment fee?
UST Answer: No, UST does not have an enrollment fee.

Q: What is the history of the program?
UST Answer: UST was founded in 1983 by a small group of nonprofits in conjunction with the United Way in Southern California. It has grown to a membership of more than 2,000 501(c)(3)s nationwide. Assets exceed $95 million and cover more than 210,000 employees.

Q: What happens if I leave?
UST Answer: While various states have minimum “opt out” periods of two to five years, there is no minimum term of participation for UST. Upon notification of termination UST will refund 85% of any positive amount in an account; the last 15% being released after the next audit of the Trust.

Nelligan AssocaitesQ: What is the cost of participation?
UST Answer: Administrative and operating expenses are determined on an annual basis at the time of audit. These costs continue to be highly competitive, averaging 11% of member deposits. Investment income helps offset the cost of participation.

Q: How am I protected?
UST Answer: By participating you are building an account to cover incurred claims and to protect you in the event that claims increase unexpectedly.

Q: What happens if claims exceed deposits?
UST Answer: On a short-term basis, claims will continue to be paid by UST and over the following year your reserve will be rebuilt through your regular deposits. In subsequent years, your rate is reviewed and is driven by your claims experience. However, if the shortfall is significant, you will be required to make supplemental payments to return to a positive balance.

Q: Is stop-loss protection provided?
UST Answer: UST is not an insurance product; we do not pool liability. However, we do offer protection from catastrophic claims through our self-funded stop-loss recovery. UST will pay a portion of your claims if they exceed 10% of taxable payroll or $25,000 (whichever is greater). Because it is self-funded, this protection is at a discount when compared to the premium for purchased

Q: How are account balances managed?
UST Answer: While required deposits are continually managed to avoid a shortfall in your account, UST also protects your account from becoming over-funded. Beginning in the third year, a member becomes eligible for Account Refunds, and funds held in excess of the member’s fund balance target are returned.

Q: How does the program compare to insurance?
UST Answer: With insurance, organizations pay a premium and an insurance company covers all claims owed to the state. It is a pooled arrangement and organizations can insure against excess claims liability. However, insurance premiums are calculated so that premiums exceed claims; the excess is income for the insurance company. UST does not underwrite its members, so excess contributions remain an asset on your books and can be refunded. However, you are responsible for any deficit should claims charges exceed your account balance. UST helps you rebuild your account if you ever overdraw it.

Q: How are claims managed?
UST Answer: UST’s unemployment claims monitor is a dedicated team that handles claims protests on the behalf of participants and provides support throughout the hearing process. The claims monitor also provides a suite of online resources, including management training and claims history and analysis.

Q: How is the program governed/administered?
UST Answer: UST is governed by a volunteer Board of Trustees, elected by participants. All trustees are nonprofit executives and govern from the perspective of a participant. Administration and other services are performed by contracted providers, selected by, and accountable to, the Trustees. In contrast to some unemployment programs that provide services through affiliated for-profit companies, UST’s Trustees are free to select any service provider that meets service and cost expectations. This helps to keep costs low for you.

Q: Who endorses the program?
UST Answer: UST is sponsored by over 65 state and national nonprofit affiliation groups. A complete listing can be found at www.ChooseUST.org.


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Download The Above Q & A Here.