Surety Bond Encyclopedia

Unemployment Compensation Surety Bond - Statewide in Pennsylvania

Brief Summary

This bond is not a tax bond. It backs a 501(c)(3) nonprofit's promise to repay the UC Fund for benefits charged to it after electing reimbursement instead of paying contributions. Posting a surety bond instead of a cash collateral deposit keeps 1% of your taxable payroll in your operating account.

A 501(c)(3) nonprofit that elects to reimburse the Pennsylvania UC Fund instead of paying contributions must post a collateral bond or cash deposit equal to 1% of its taxable wages for the most recent four calendar quarters before the election. The bond runs to the Department of Labor & Industry on Form UC-1681 for a 48 month term under Section 1106(d) of the PA UC Law. Political subdivisions and Commonwealth agencies do not post it.

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How to Apply for a Unemployment Compensation Surety Bond:

Confirm the organization is a 501(c)(3) electing reimbursable status. Political subdivisions skip the bond.
Pull taxable wages for the four calendar quarters before the election, or count employees if you are a new employer.
Calculate the amount at 1% of those taxable wages, or $100 per projected employee for a new employer.
Have the surety execute the original Form UC-1681 with all four signatures and a power of attorney.
Submit the bond with Form UC-1692 to UC Tax Services within the election deadline.
Replace the bond within 30 days if the department requests a replacement.

Detailed Information About the Pennsylvania Unemployment Compensation Surety Bond:

Who posts it and who does not

Pennsylvania lets political subdivisions and 501(c)(3) employers choose the reimbursable method, paying back the UC Fund for benefits actually charged to them instead of paying contributions at an assigned rate. Only the nonprofits carry a collateral requirement. Article XI employers with 501(c)(3) status that elect reimbursable coverage must submit a collateral bond or deposit with the election. An Article XII political subdivision is not required to, and Commonwealth agencies under Article X have no collateral requirement.

How the amount is figured

The bond or deposit equals 1% of the organization's taxable wages for the most recent four calendar quarters before the election. A nonprofit without four quarters of wage history has three options under the department's UCP-16 guide: multiply the number of employees by the taxable wage base of $10,000 and then by 1%, which works out to $100 per employee, estimate each employee's taxable earnings and take 1% of the total, or let UC Tax Services set the amount. Bonds and deposits are reviewed every four years.

What the bond guarantees

Under 34 Pa. Code § 63.93 the bond must secure reimbursement of benefit payments based on wages paid during the election period, including benefits paid after the period ends, plus interest and penalties. The surety must be an insurance company holding a certificate of authority in Pennsylvania.

Form, term and deadlines

The bond must be the original, on Department of Labor & Industry Form UC-1681, with all four signatures and a power of attorney attached. The form sets a 48 month term ending December 31. A new nonprofit may elect reimbursement within 30 days of the mailing date of its initial contribution rate notice. Otherwise the written request must be received by December 1 to take effect January 1. Form UC-1692 is the election form.

What happens if the bond lapses

If the employer never provides the bond or deposit, the election is void. If a bond stops being effective during the election and a replacement is not provided within 30 days after the department asks for one, the department terminates the election. The surety on Form UC-1681 may cancel effective the first day of a calendar quarter with 60 days written notice to the Commonwealth.

Eligibility and Requirements for a Pennsylvania Unemployment Compensation Surety Bond:

Obligee is the Pennsylvania Department of Labor & Industry.
Bond amount of 1% of taxable wages for the most recent four calendar quarters before the election.
Surety must hold a certificate of authority to write the coverage in Pennsylvania.
Original bond on Form UC-1681, with a 48 month term ending December 31.
Only a surety bond or cash is accepted as collateral for a reimbursable employer.

Pennsylvania Unemployment Compensation Surety Bond FAQs:

How much is the bond?

1% of the organization's taxable wages for the most recent four calendar quarters before the election. A new nonprofit can use $100 per projected employee, which is the $10,000 taxable wage base times 1%, or let UC Tax Services set the amount.

Does every reimbursable employer post this bond?

No. It applies to 501(c)(3) nonprofits that elect reimbursement. Political subdivisions that elect reimbursement are not required to post collateral, and Commonwealth agencies have no collateral requirement.

Does the bond guarantee our UC taxes?

A reimbursable employer does not pay contributions. The bond secures repayment of UC benefits charged to the employer for wages paid during the election period, including benefits paid after it ends, with interest and penalties.

How long does the bond last?

Form UC-1681 sets a 48 month term ending December 31, and the department reviews collateral every four years. Expect to recalculate and renew at that point.

What if our bond is cancelled?

The surety can cancel effective the first day of a calendar quarter with 60 days notice. If no replacement is provided within 30 days after the department requests one, the department terminates the reimbursable election.