Nonprofit Organizations

Initial Reporting Method

A nonprofit organization which is subject to the Act is a contributory employer unless they elect in writing to be a reimbursable employer. Absent the written election from the employer within 30 days of becoming subject to the Act, the Department will establish a contribution account for the employer which will then be in effect for two calendar years. A nonprofit organization electing to become a reimbursable employer must make a written election request within 30 days after the organization becomes subject to the Act and attach a copy of their letter of exemption, Section 501(c)(3), from the IRS.

An election by the employer to be a contributory employer, or action on the part of the Department to establish an account for the employer as a contributory employer, because no election was made, will remain in effect for two calendar years. An initial written election by the employer to be a reimbursable employer is in effect for a minimum of one year. All subsequent written elections by the employer, contributory or reimbursable, are in effect for two calendar years.

The letter of exempt income tax status from the IRS may take some time to obtain. A contributory account is established for the employer until the letter is received. The employer will file reports as a contributory employer. A due date for reports is established and no remittance is necessary unless the exemption by the IRS is denied. If the exemption is denied, the employer will continue to be a contributory employer. If the exemption is granted and the employer is not exempt from reporting wages to the Department of Workforce Services because they have four or more employees, the employer may make a retroactive election at that time to be reimbursable.

The employer has 30 days from the date of the IRS letter to provide a copy to the Department in order to be granted reimbursable status retroactive to the date he became subject to the Act. When the IRS letter is provided within the 30 day period, all contributions paid by the employer in excess of benefits paid to former employees will be refunded. The Department may, for good cause, extend the 30 day period within which the election is made or the 30 days within which the letter of exemption is provided.

A nonprofit organization, exempt under Section 501(c)(3), that has never made a reporting method election will be given the opportunity to elect reimbursable coverage, retroactive to the date they became subject, or the statutory limitation period, whichever is less.

Changing a Reporting Method

A governmental organization or a nonprofit employer may elect to change reporting methods with the following restrictions:

  1. Any election to change from one method to the other must be made in writing no later than 30 days prior to January 1st of the year for which the change is requested. The Department may, for good cause, extend the 30 day period within which a change from one method to the other is requested.
  2. If the initial election was the reimbursable method, the employer may elect the contributory method at the end of the first year. Any subsequent changes may only be made after two years of contributory or reimbursable reporting and will remain in effect for two calendar years.
  3. If the initial election was the contributory method, the employer may elect the reimbursable method after two years. Any subsequent changes may only be made after two years of contributory or reimbursable reporting and will remain in effect for two calendar years.
  4. A reimbursable employer who changes to the contributory method will be assigned the lowest "earned" rate for that year.