Understanding SUI Risk Transfer

April 21, 2015

Understanding SUI Risk Transfer

The essence of any meaningful, effective state unemployment insurance (SUI) risk transfer is to minimize or eliminate future unexpected, adverse risk.

Creating a concrete, working SUI funding strategy to manage an election by a nonprofit to directly reimburse a state, dollar-for-dollar for future benefit charges, requires a clear understanding of the risk appetite and potential events that may affect an organization from year-to-year. Plus, it also requires an informed understanding of who is contractually covered and who is responsible to pay when limits are reached.

What that means is, shrewd stewards of nonprofit organizations’ limited funds must prepare for and be mindful of:

• how much tolerance their organization has for maximum unexpected SUI losses,

• taking advantage of opportunities to transfer the unacceptable portion of their risk to a party willing to assume the hazard for a reasonable fee

• knowing the details and financial implication of any risk transfer coverage.

• engaging with a solid, reputable, and highly rated insurance carrier

Transferring all or a portion of the risk of nonprofit organizations’ SUI reimbursements has been an available option for years and is currently offered in many forms. The most efficient options include;

1. Fully insured, first dollar, claims paid coverage with cost control through a TPA. It is a pure risk transfer of reimbursing benefit charges to a third-party backed by a guaranteed surety bond issued by a suitably rated insurance company.

2. Partially insured under a working stop-loss coverage suitable to the risk tolerance of an individual nonprofit or group of nonprofits and provided by a financially sound insurance company.

3. Membership in an Unemployment Savings Program organized so that it insures each member against the losses of another with no joint and several liability and has a proven working stop-loss for each member plus the entire group.

4. Individually designed coverage for specific unconventional nonprofit reimbursing risks.

Membership in group self-insured SUI programs, some formed as trusts others less formally structured, has been available to nonprofits for many years. The risk transfer components in these programs vary. There may be no transfer whatsoever, pooled stop-loss coverage utilizing reserves within the group itself, or stop loss provided by a private insurer.

Managed group-shared-risk trust funds utilize an accrued and co-mingled capital advance from their nonprofit trust member credit accounts to reimburse state agencies for SUI benefit charge losses for the entire group trust. Though trust managers go to great lengths to insure specific benefit charges are assigned to the appropriate designated member, there may be no elimination or reduction of the collective groups’ total risk or liability. In fact, some programs’ members share collectively in losses by other members who shut down their operations.

For more information about risk transfer options contact the leader in SUI options, First Nonprofit Group.


Source: First Nonprofit Group’s “Financial Mechanics of Funding SUTA” series

Next article, “Best and Safest Practices for SUI Options” (Stay tuned!)

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We first started using First Nonprofit’s Unemployment Savings Program when we were a small startup nonprofit.  We didn’t have an HR department and needed expertise in the event that an unemployment claim was made.  We knew we were eligible to be a reimbursing employer, but weren’t sure how to navigate that process.  They made it easy to set things up, plan for, and then manage claims when they came at a very reasonable cost. The amount of time and stress they’ve saved us dealing with all this has been worth way more than the cost.  We’ve now grown to a large nonprofit and do have an HR department but have no plans to stop using their services.  I highly recommend them to every nonprofit I come into contact with!


Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.

Prevent Blindness America, Chicago, IL

Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.

Illinois Network of Charter Schools, Chicago, IL

It has been our sincere pleasure to maintain a strong, vibrant business partnership with First Nonprofit. We greatly admire their strong industry knowledge, technical expertise, constant professionalism, knowledgeable and dedicated staff. They are always extremely responsive, personable and provide us with the necessary guidance and recommendations on a numerous variety of employment scenarios.

Thresholds, Chicago, IL

NYCON members who use First Nonprofit’s programs enjoy enduring savings and improved efficiency. Our association knows that success, because from the beginning, we achieved the same great benefits. Great savings, seamless technology, and responsive service. NYCON highly recommends First Nonprofit’s remarkable unemployment solutions.

New York Council of Nonprofits, Albany, NY

Visually Impaired Preschool Services has been a client of First Non-Profit since it was first offered as a benefit of VisionServe Alliance. We completed a thorough evaluation of cash savings to our agency before taking advantage of this wonderful benefit and it has been a very wise decision. Our experience with the processes from accounting to claims have been professional, expeditious and easy.

Visually Impaired Preschool Services, Louisville, KY

Luckily for us, our interactions regarding any issues with staffing has been very minimal! I can say that all other interactions with regards to billing, 941 reporting, etc. have been extremely pleasant, accommodating and easy to work with. Kim Ghanayem is always prompt, professional and friendly. Thank you so much!

Neurologic Music Therapy Services of Arizona, Phoenix, AZ

First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.

Visually Impaired Preschool Services, Louisville, KY