A defined-contribution retirement plan where employees can make pre-tax (traditional) or post-tax (Roth) contributions from their wages, often with an employer match. PEOs commonly offer access to a master 401(k) plan, giving small businesses institutional-quality investment lineups and lower per-participant administrative fees than they could access directly.
The 2010 federal healthcare law that, among other things, requires applicable large employers (50+ full-time equivalent employees) to offer affordable health coverage to full-time employees. PEOs handle ACA compliance including 1094-C / 1095-C reporting, affordability tracking, and employer mandate calculations.
An employer with 50+ full-time equivalent (FTE) employees in the prior calendar year, subject to ACA employer mandate and reporting requirements. PEOs handle ALE determination and 1094-C/1095-C filings.
An HR services provider that handles payroll, benefits administration, and HR — but, unlike a PEO, does NOT co-employ your staff. ASOs don't share employer tax ID, don't carry the master health plan, and don't pool workers' comp. ASOs are a lighter, lower-cost alternative to a PEO for businesses that just want admin help.
The day-to-day management of employee benefits — enrollment, life event changes, claims support, COBRA, retirement plans, FSA/HSA administration, and carrier coordination. A core PEO service.
A pricing model some PEOs use where admin fees are bundled into a single per-employee-per-month (PEPM) rate that includes payroll, benefits admin, HR, and sometimes workers' comp. Easier to budget than unbundled pricing.
Federal law requiring employers with 20+ employees to offer continued health coverage to terminated employees and qualifying dependents for 18–36 months. PEOs administer COBRA notifications, election tracking, and premium collection.
The legal arrangement where a PEO and a client business share employer responsibilities. The PEO handles payroll, benefits, tax filings, and workers' comp under their own EIN; the client retains day-to-day operational control of employees. Co-employment is the foundational structure of the PEO industry.
IRS certification granted to PEOs that meet specific financial, reporting, and operational standards. CPEOs assume sole liability for federal payroll taxes — meaning the IRS can't double-bill the client business for taxes the PEO already paid. CPEO status is a marker of financial stability and is widely considered the most important PEO credential to verify.
Federal law requiring contractors on federally funded construction projects (>$2,000) to pay workers at least the locally prevailing wage. PEOs that serve construction clients handle Davis-Bacon certified payroll and weekly WH-347 filings.
A federal tax ID assigned by the IRS to a business entity. Under a CPEO arrangement, the PEO files federal payroll taxes under their EIN for client employees, providing liability transfer.
An organization that acts as the legal employer of a worker for tax and compliance purposes — typically used for international hiring or contractor-to-W-2 conversions. EORs differ from PEOs in that EORs typically handle a smaller set of administrative functions and don't usually offer the full benefits/HR/workers'-comp pooling that PEOs do.
Federal agency that enforces anti-discrimination laws (Title VII, ADA, ADEA, GINA, EPA). PEOs handle EEO-1 reporting for employers with 100+ employees and provide compliance support on discrimination claims.
Federal law (Employee Retirement Income Security Act of 1974) governing employer-sponsored retirement and welfare benefit plans. PEOs handle ERISA compliance including 5500 filings for master 401(k) and health plans.
A non-governmental accrediting organization that audits PEOs on financial reliability, ethics, and operational standards. ESAC accreditation requires a $1M surety bond and quarterly financial audits. Many top-tier PEOs are both CPEO and ESAC accredited.
The federal payroll tax funding Social Security and Medicare — 6.2% Social Security + 1.45% Medicare paid by both employer and employee. PEOs withhold, remit, and report FICA on client payrolls.
Federal law setting minimum wage, overtime, recordkeeping, and child labor standards. PEOs handle FLSA-compliant overtime calculations, exempt vs non-exempt classification analysis, and recordkeeping.
Federal law providing eligible employees up to 12 weeks of unpaid job-protected leave per year for qualifying medical and family reasons. Applies to employers with 50+ employees within 75 miles. PEOs handle FMLA eligibility determination, leave administration, and return-to-work coordination.
Federal payroll tax (0.6% of first $7,000 in wages per employee, after state credit) funding state unemployment programs. PEOs file FUTA on client payrolls.
A tax-advantaged savings account paired with a High Deductible Health Plan (HDHP) that lets employees contribute pre-tax dollars to pay for qualifying medical expenses. PEOs administer HSAs alongside their master health plans.
Software that stores employee data, manages HR processes (onboarding, performance, leave), and integrates with payroll and benefits. PEOs typically provide HRIS as part of their platform.
A federal regulation (effective 2020) that lets employers reimburse employees tax-free for individual marketplace health insurance premiums, instead of offering a group health plan. PEOs that support ICHRA can administer reimbursements as an alternative to traditional group coverage.
Federal employment eligibility verification form required for all US new hires. PEOs handle I-9 completion, document retention, and E-Verify integration where applicable.
The group health insurance plan a PEO sponsors and offers to all client employees as a unified group. Pooling small businesses into one master plan gives them access to lower rates and richer coverage than they could get individually.
A multiplier applied to your workers' compensation premium based on your historical claim experience compared to industry peers. A MOD of 1.0 is industry average; below 1.0 is better than average, above 1.0 is worse. PEOs help manage MOD rates through claim handling and return-to-work programs.
The organization that develops workers' comp class codes, rate filings, and experience MOD calculations for most US states. PEOs use NCCI classifications to assign workers' comp rates by job role.
Department of Labor agency that enforces affirmative action and EEO requirements for federal contractors. PEOs serving federal contractors handle OFCCP compliance including Affirmative Action Plans (AAPs), VETS-4212 reporting, and OFCCP audit support.
Federal agency enforcing workplace safety standards. PEOs handle OSHA 300 injury logs, 300A annual posting (Feb 1 – Apr 30), 301 incident reports, and electronic reporting requirements.
A company that enters a co-employment relationship with client businesses to handle payroll, benefits, HR, workers' comp, and compliance. The PEO becomes the employer of record for tax purposes while the client retains operational control of employees.
The standard pricing unit in the PEO industry — typically $50–$200 per employee per month for administrative services, with benefits and workers' comp passed through separately or bundled.
State-mandated paid leave programs in CA, NY, NJ, MA, CT, WA, OR, CO, DE, and others. PEOs administer state PFL programs including employee contributions, claim filing with state insurers, and return-to-work coordination.
The locally prevailing rate of wages and fringe benefits for a specific trade or occupation, set by the Department of Labor for federally funded projects (Davis-Bacon) or by state law for state-funded projects. PEOs serving construction clients track prevailing wage rates and handle certified payroll.
State payroll tax funding state unemployment insurance programs. Rates and wage bases vary by state and by employer experience rating. PEOs file SUTA under their own state account, and clients typically inherit the PEO's experience rating — often beneficial for new or small employers.
State-mandated insurance covering medical expenses and lost wages for employees injured on the job. Mandatory in nearly all states (some have employer thresholds — TX is largely opt-in). PEOs pool client businesses onto a master WC policy, smoothing premium volatility and removing individual policy audit pain.
Annual federal wage and tax statement provided to employees and the IRS. PEOs issue W-2s under their EIN as the employer of record for federal payroll tax purposes.
Federal form employees complete to instruct employers on how much federal income tax to withhold from wages. PEOs handle W-4 collection, updates, and withholding calculations.
Federal certified payroll form required weekly for contractors on Davis-Bacon-covered federal construction projects. PEOs serving construction clients file WH-347s on behalf of the contractor.
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