Can I Reimburse The Trust Fund Rather Than Contribute Taxes? Is It To My Advantage?

Only employers who qualify as non­profit organizations under Section 501(c)(3) of the Internal Revenue Code and government entities have the option of reimbursement. Reimbursement is a form of self­insurance. Under the reimbursement option, eligible employers are required to pay each quarter an amount equal to the benefits paid to their former employees. Reimbursable employers submit quarterly payroll reports, the same as tax paying employers. They do not, however, include a payment with their report. Every quarter a bill is sent which lists benefits charged to their account. The bill is payable within 30 days of the mailing date. Interest and penalty are assessed for delinquent payment. If an employer chooses reimbursement, this option must remain in effect for a minimum of two calendar years. After this two­year period, a change to tax­paying status must be requested in writing. Some factors to consider in deciding whether to choose the reimbursement option are:
  • Turnover rate: generally reimbursement is more advantageous to employers with stable employment;
  • Estimation of cost: tax paying employers have known costs based on their tax rate, payroll and the taxable wage base, while reimbursable employers could have varying costs, depending on the number of former employees receiving benefits.
  • Charging of benefits: there are instances where the cost of benefits are not charged to contributory employers, i.e. when benefits are paid subsequent to a claimant's requalifying after being disqualified for voluntarily leaving his/her last employer without good cause connected with the work, or for misconduct in the course of the last work, all base period contributory employers automatically are relieved of charges; non­charging of benefits does not apply to a reimbursable employer; such employers are responsible for all regular unemployment insurance benefits charged to their accounts.
  • Extended benefits: during periods of high unemployment when extended benefits are paid, reimbursable employers are responsible for all of the non­federal share of extended benefits charged to their accounts. (Contributory employers are not assessed charges for extended benefits.)
  • Overpayments: contributory employers' accounts are credited for the full amount of established benefit overpayments; the accounts of reimbursable employers are credited only to the extent that repayment of the overpayment is made by the claimant.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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