POTENTIAL LIABILITY FOR UNEMPLOYMENT INSURANCE (UI) BENEFITS WHEN ELECTING 
THE REIMBURSABLE METHOD OF FINANCING UNDER THE CALIFORNIA UNEMPLOYMENT 
INSURANCE CODE (CUIC)

A nonprofit organization, as defined under section 501(c)(3) of the Internal Revenue Code (law.cornell.
edu/uscode/text/26), public entity, or an Indian tribe as defined under sections 801 or 802 of the California 
Unemployment Insurance Code (CUIC) (leginfo.legislature.ca.gov/faces/codes.xhtml) may elect to reimburse 
the Employment Development Department (EDD) for the cost of Unemployment Insurance (UI) benefits. This 
includes extended duration benefits, and federal state extended (FED-ED) benefits paid in lieu of contributions 
normally required of tax rated employers. An election of the cost of benefits method must remain in effect for not 
less than five complete calendar years for a nonprofit organization, or two complete calendar years for a public 
entity or Indian tribe. However, section 803(h)(2) of the CUIC requires the EDD to terminate all such elections 
of any Indian tribe that is more than 90 days delinquent in the payment of contributions, bonds, advances, 
reimbursements, or applicable penalties or interest.

“The cost of benefits paid” means the proportion of the total amount of benefits or payments made to a claimant 
in which the total wages paid to that claimant in his or her base period by that entity bears to the total wages paid 
to that claimant in employment by all employers in his or her base period. 

A public entity, or Indian tribe electing the cost of benefits method of financing, could have a potential liability 
of $35,100 per employee separated from employment if such employee files claims in two succeeding years and 
the public entity or Indian tribe is the base period employer for both claims. Each such employee could be paid 
$17,550 in the first benefit year and also $17,550 in a second benefit year ($450 a week for 39 weeks, including 
13 weeks of FED-ED benefits). Public entities and tribal employers pay the full cost of regular and extended 
benefits. During periods of high unemployment,  FED-ED benefits may be available to workers who have 
exhausted their regular UI benefits. FED-ED benefits usually consists of 13 weeks of additional UI benefits. Public 
entities and federally recognized Indian tribes are always required to pay 100 percent of the cost of FED-ED 
benefits paid regardless of their method of financing.

See chart below. Please note that these amounts could change in future years as the result of federal or state 
legislative action.

Maximum                  Maximum    Fed-State                     Year 1   Year 2                  Total Potential 
Weekly Amount            Number of  Extended                                                       Liability
                         Weeks      Benefit
                         Allowed 26
$450                     $11,700    $5,850                        $17,550  $17,550                 $35,100

A nonprofit organization under the same election and set of circumstances, however, could have a potential 
liability of $29,700 per employee. Nonprofits pay 100 percent of regular UI benefits ($23,400 for two succeeding 
benefit years), 100 percent of the first week of FED-ED benefits, and 50 percent of the cost of the last 12 weeks 
of FED-ED benefits ($6,300 for two succeeding benefit years). The first week of FED-ED benefits is paid by the 
employer.

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See the chart below. Please note that these amounts could change in future years as the result of federal or state 
legislative action.

Maximum                  Maximum    Fed-State            Year 1  Year 2  Total Potential 
Weekly Amount            Number of  Extended                                                         Liability
                         Weeks      Benefit
                         Allowed 26
$450                     $11,700    $3,150*              $14,850 $14,850                             $29,700
*First week represents 100 percent and last 12 weeks represent 50 percent FED-ED benefit charges.

Comments: The computations for the illustrations above are based on the maximum weekly UI benefit amount 
of $450 as provided in section 1280 of the CUIC. Types of UI programs and duration of benefits are as mandated 
under the CUIC.

An entity electing the reimbursable method of financing for UI benefits must reimburse the EDD for all UI 
benefits paid on their behalf. It is not entitled to any relief of charges due to any benefit payment errors, pursuant 
to section 803(c) of the CUIC. If the claimant repays the EDD for the overpayment, the reimbursable employer 
will be entitled to a credit against its liability. The reimbursable employer can be charged  for its share of UI 
benefits paid for a period of three years following the termination of the election or business operations, pursuant 
to section 803(j) of the CUIC. In addition, if the entity fails to pay the contributions required within the time 
required, a 10 percent penalty and interest will be assessed, pursuant to section 803(f) of the CUIC.

The EDD is an equal opportunity employer/program. Auxiliary aids and services are available upon request to 
individuals with disabilities. Requests for services, aids, and/or alternate formats need to be made by calling 
1-888-745-3886 (voice) or TTY 1-800-547-9565.

This information sheet is provided as a public service and is intended to provide nontechnical assistance. 
Every attempt has been made to provide information that is consistent with the appropriate statutes, rules, 
and administrative and court decisions. Any information that is inconsistent with the law, regulations, and 
administrative and court decisions is not binding on either the Employment Development Department or 
the taxpayer. Any information provided is not intended to be legal, accounting, tax, investment, or other 
professional advice.

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