Classic PEO - Types of Professional Employer Organizations (PEOs)

Employee taxes reported and deposited under the PEO’s FEIN.

Relief from responsibility for making tax deposits to the government or risk getting fined for incorrect withholding amounts. 940 and 941 reports are filed by the PEO. All issues with tax compliance are the PEO's responsibility. Payroll is done by the PEO.

Coverage provided under PEO’s master policy.

Your employees are covered under the PEO's master policy and they have responsibility for managing the claims. When seeking a PEO relationship, most PEOs will want to see a history of your Workers' compensation claims (risk underwriting). PEOs want to pool "good risk" accounts. In most states your modifier rate will follow your company. By joining a PEO your company may be able to enjoy significant discounts or get coverage that is otherwise difficult to obtain. Employer rules for providing coverage to employees vary by state. Each PEO will require you to sign a Client Services Agreement (CSA) when becoming their client. This is an important document that defines each party's responsibilities in the PEO relationship and may affect terms of coverage.

Claims management provided by PEO. Safety programs compliance administered by PEO.

Since you are joining the PEO's master Workers' Compensation policy, the PEO has a strong financial interest in ensuring the claims are managed. The PEO will work to ensure that the questionable claims are contested and legitimate claims are paid promptly. They will work to implement or improve safety programs in your company. If your company needs assistance with reducing your claims each PEO will have a staff to help you. Most PEOs will terminate clients that fail to follow recommended safety practices. PEOs work hard to ensure that their PEO has an attractive policy in place for all of their members. This means that PEOs will shop insurance companies (annually) to ensure the PEO group is obtaining competitive coverage. Be advised that different PEOs have coverage provided by different carriers. Be sure to ask a PEO about the carrier providing the coverage. Clients that need a PEO with a particular AM Best rating for Workers' Compensation coverage should contact StaffMarket for assistance.

Coverage offered under PEOs master policy.

Many PEOs negotiate master policies for all of their clients / employees. These policies may be Health Maintenance Organization (HMO), Preferred Provider Organization (PPO) or Point Of Service (POS) policies. Options vary by PEO and by state. Most PEOs require your company to obtain a "participation rate" that is calculated by dividing the number of people seeking coverage divided by the number of people eligible for the plan (less people covered elsewhere like under a spouse's policy). Participation requirements vary by PEO. Most PEOs will allow your company to split premium costs between your company and the employees. Companies that offer to contribute to the premium costs are more attractive to a PEO. The PEO will work to ensure ERISA compliance. Some PEOs may not be able to offer coverage under a master group policy but can offer to help you acquire and administer your own PPO policy. Almost all PEOs will want to review an "employee census" that shows the age, sex and level of dependent coverage (single, family, etc) for the group. StaffMarket will provide a template to attach to your RFP if required.

Supplemental benefits offered under PEOs master policy. 401K provided by policy in clients name.

Employee Benefits covers a large area of services including, Life Insurance, Short Term Disability, Long Term Disability, 401K, FSA, etc. PEOs will often have a master policy in place that will be made available on a voluntary basis to your company and employees. For 401K plans, the rules for PEOs have changed recently. PEOs can assist your company set up a 401K plan that meets your needs and satisfies governmental regulations. Types available may include: Traditional 401K, Simple 401K, Safe Harbor 401K or profit sharing . In most cases PEOs will set up a plan that you can keep (without rolling it over to a new administrator) if you decide to end the PEO relationship.

Multitude of services offered in either “a la carte” or bundled pricing.

PEOs vary widely in their offerings and pricing for HR services. Some services like preparation of employee handbooks are always included while others such as drug testing may be provided for a fee as required. Be sure to check your Client Services Agreement (CSA) for details about your co-employment responsibilities.

Provided by PEO.

PEOs work to ensure compliance with a multitude of governmental regulatory areas. If you do not have a dedicated HR person or department, the PEO will act as one. Once you are engaged with a PEO you will be assigned a dedicated HR person to assist with all of your HR subjects. If you currently have an HR person the PEO can act as an invaluable advisor to them. The HR services you expect need to be clearly established with a PEO prior to signing the CSA. One new and important area to investigate is Employment Practices and Liability Insurance (EPLI). This is a special policy that insures your company in the event of a sexual harassment or discrimination suit. Ask StaffMarket or your PEO for details about this coverage.