Act 76 - New Unemployment Mandate for Small Nonprofits

In 2023, Vermont's legislature passed a new law called H.217, which went into effect on June 20, 2023. This law, also known as Act 76, has some important changes for nonprofit organizations as it relates to unemployment insurance coverage.

Before this law was passed, nonprofit entities with fewer than four employees were exempt from participating in unemployment insurance. Starting July 1, 2024, ALL nonprofits, no matter how many people they employ, must register with the Vermont Department of Labor to be part of the unemployment insurance program.

What this means is that nonprofit organizations, big or small, must follow these rules:

Report employees' wages every quarter.
Report hiring new employees.
Pay unemployment claims if their employees lose their jobs and are eligible for unemployment benefits.

Nonprofit entities have the option of participating as either a taxable or a reimbursable employer with the state for unemployment insurance.

Taxable employers who newly register with the state:
- Will be assigned a "new employer" 1% tax rate.
- Will pay quarterly contributions to the state based on taxable payroll (capped annually by the state).
- 501(c)(3) employers are not required to pay federal unemployment insurance taxes.
- Will have their unemployment claims paid directly out of the state's UI Trust Fund.
Reimbursable employers who newly register with the state:
- Are not required to pay state or federal unemployment taxes.
- Are exempt from any quarterly contributions to the state.
- Must pay back the state in full for any unemployment claims that arise associated with individuals that separated from employment.