Each state manages their unemployment program differently. All states require organizations to notify the state by the deadline (typically Nov. 30th, but it varies). Many states require special documentation and forms, with 18 states also requiring a state surety bond to opt out. URS helps clients navigate the tricky state requirements and meet the deadline by providing the paperwork and submitting it to the state on your behalf.

Risks – The risk of moving out of the state system is claim volatility. In the state tax system there is a minimum and a maximum tax rate. As a reimbursing employer you are responsible for every dollar paid out by the state in unemployment benefits to former employees. It is important if you choose to be a reimbursing employer that you have a plan in place to address potential increases in claims charges. First dollar or stop loss insurance are two options for addressing that issue.

Benefits - Organizations that remain in the tax system may be overpaying for unemployment. The state tax system is funded using tax rate schedules and the state taxable wage base. Each state utilizes these two factors to determine individual contribution rates. The state may need to increase taxes to remain solvent after a recession. These increases to the tax rate or taxable wage base can be unexpected especially if your organization has not experienced recent layoffs or poor claims history. Opting out of the tax system allows you to save money and be more directly in- control of your costs.

Most states require an organization to opt out of the state tax system for a minimum of 2 years. There are exceptions like CA that requires 5 years. Contact URS to learn more about your state requirements.