The Internal Revenue Service is pushing ahead with efforts to certify professional employer organizations, or companies that provide human resources and benefits services for a client’s workers.
The PEO certification program could increase the PEOs’ ability to assume responsibility for complying with federal human resources and benefits rules, such as the Affordable Care Act employee counting rules.
The IRS has fleshed out its new federal PEO certification rules in Revenue Procedure 2017-14. The agency explained how PEOs could get certified in regulations and batches of guidance issued earlier this year. This is where the IRS talk about how PEOs can stay certified, and problems that could lead to loss of certification.
PEOs have been sharing responsibility for clients’ workers, and attempting to establish “employer of record” relationships with clients’ workers, for years. But conflicting and unclear federal and state laws have limited PEOs’ efforts to assume full employer-of-record responsibility.
When Congress passed the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014, it included a provision that calls for the IRS to set up a PEO certification program. Once the certified PEO program is fully operational, a certified PEO will be able take full responsibility for filing a client employer’s federal payroll taxes.
A bigger PEO industry could hurt benefits brokers in some ways and help them in other ways. PEOs often buy their own insurance through insurance brokers, and some pay sales commissions to insurance brokers who help them find clients. TriNet Group Inc., a San Leandro, California-based PEO, has been active in sponsoring agent and broker events.
But a PEO may also increase the level of competition benefits brokers face, by putting many small employer groups into large PEO group.
The IRS began taking PEO certification applications this summer. It’s supposed to provide 2017 certification for any PEO that got a complete and accurate application in by Oct. 1, 2016.