By: Rob Goll
zizzl | VP Business Development
The top reasons we hear from companies leaving a PEO are cost, culture, health plan and carrier flexibility. Any of these reasons and others have employers leaving PEO’s as their companies grow. It is clearly a commitment to the future. The struggle is when it is time to “Go” what is the next step?
The following are five major areas of consideration:
- Federal Tax Withholdings: Check if your PEO is registered with the IRS as a Certified PEO (CPEO). This would prevent FICA and FUTA wage bases from restarting if a business leaves sometime after the first of the year.
- State Tax Withholdings: Rules vary by state and you must know if you need to reinstate your state unemployment tax (SUTA) account. There are states that record a company’s claims history when with a PEO. Other states may require you to restart your tax rate or even go back to the base rate until you build a claims history.
- FSA: An FSA is owned by the employer. Therefore, when the PEO is the employer/co-employer and the agreement is discontinued employees may not be able to secure the FSA funds. There are PEOs that will not process claims after the agreement is concluded. This can be true even if the claim was filed before the date that the agreement was discontinued. Contact your PEO to understand all the facts and if necessary, advise your employees so they can spend their FSA funds.
- Medical/Dental Deductible: Check the effective dates for change as a result of leaving the PEO. PEOs can have one standard date but others grant each company the option to choose their date. Employers need to make sure that if the deductibles and out of pocket maximums do reset that employees are informed that they may have extra out of pocket expenses.
- COBRA: After leaving the PEO the PEO can charge fees to manage COBRA members.
When committed to leaving a PEO a trusted benefits advisor that has experience in helping companies exit PEO’s can be invaluable. They will help you pull together benefits, payroll, 401k, LTD, STD, life insurance, liability insurance and more. This is the perfect time to tie it all together with modern HR technology, including a benefits administration tool. You’ll be glad you did.