Skip Navigation Links.
Online Support available
Monday through Friday
7:30 a.m. - 5:30 p.m.
Click here to get help!
OhioBWC - Basics: (Policy library) - File

Employer Policy

 

Professional Employer Organization (PEO) Policy including Use of NCCI Manuals of Clients

 

Policy Effective Date: July 2007

Revision Date: March 12, 2008

 

 

Purpose

 

·        To provide general information about PEO’s and how they are to keep and report payroll and/or claim records by client NCCI manuals to conduct business in Ohio.

 

·        To assure proper ratemaking use of NCCI manual assignments, reporting by PEO;

 

·        To identify “Employer Information” relating to Manual Number Assignment, Coverage Status and Rating Plans releasable as Public Records Information

 

·        To reinforce that only the Employer (EMP), PEO or other EMP Rep is to be provided with “Employer Information” regarding Payroll, Premium or Security Deposit information as such information is not releasable Public Records Information.

 

·        Note: PEOs are considered co-employers of all or part of the client employer’s work force (see Ohio Administrative Code (OAC) 4123-17-15, particularly D & E)

 

·        To acknowledge that client manual number information can be provided by BWC as Public information to the PEO, but it is the PEO that actually becomes the employer of its PEO client(s) who best know and should provide the PEO with the NCCI manual/claims information.   Since the PEOs are reporting their client’s payroll, their client doesn’t incur additional WC costs except as respects that which remain as a result of “Partial” contracts.  It is the PEOs responsibility to segregate out one client’s payroll and claims from another, by manual for reporting and audit purposes and to facilitate appropriate Experience Transfers at the conclusion of any PEO contract.

 

·        Additional information is available on BWC’s web site at

https://www.bwc.ohio.gov/employer/services/policies.asp

 

Definition of PEO

 

·        Professional Employer Organization (PEO) means a sole proprietor, partnership, association, limited liability company or corporation that enters into an agreement with one or more client employers for the purpose of co-employing all or part of the client employer's work force at the client employer's work site. A PEO usually provides an integrated and cost-effective approach to the management and administration of the human resources and employer risk of its clients.

 

·        Note: A temporary employment agency is not a PEO.  For more detailed or specific PEO information not included in this Policy, see PEO Info as shown on BWC’s web page and/or contact BWC's PEO Unit responsible for all PEO administrative changes at (614) 466-6773.

 

 

Policy

 

Claims and NCCI Manual Reporting

 

·        To assure accuracy in Ratemaking, PEOs must know the coverage status and maintain payroll and claims records by policy number(s) and NCCI manual number(s) assigned to their clients for proper ‘roll-up of information for recording in those assigned to their own account(s).  PEOs are obligated by Ohio Administrative Code (OAC) Rule to use the NCCI Manual number(s) assigned to the clients to whom they have contracted services based upon their Full or Partial contract.

 

·        PEOs must maintain by policy and manual, the payroll and claims data for each such service contracted using the NCCI manual number(s) assigned by BWC to the client.  If PEO does not have the proper NCCI manual number(s) assigned on its own account as have been assigned by BWC to the Client policy, such NCCI manuals may be added to PEO accounts without requiring a Rating Inspection provided such client has been properly classified.  Otherwise, a Rating Inspection of the Client may be required before BWC can add the manual(s) to the PEO.

 

·        Payroll and Claims occurring under such agreements should be reported by the PEO using the proper PEO Policy # for rate making purposes but segregated and identifiable to each client.  This is required to facilitate any Experience Transfers back to the Client should the PEO-Employer contract be terminated or modified by either party unless the client contracts to report all or part of its own payroll and claims under the PEO (Full or Partial Lease agreement - refer to WCIS screen UW520S to determine type of contract). 

 

·        Regardless of business type, it is important to always remember that OAC 4123-17-08(D) states, in part, “The purpose of the classification procedure is to assign the one basic classification that best describes the business of the employer within a state.  Subject to certain exceptions described in the rule…..It is the business that is classified, not the individual employments, occupations or operations within the business”.  Therefore, a PEO must report payroll and claims of its client using the assigned NCCI manual #s of it client even though the PEO may have manuals assigned to its own policy more specifically describing work being done but included as incidental to the client policy; i.e.; a janitor working in a client foundry is reportable to the foundry - not the PEO janitor manual.

 

·        The client and PEO must work together to gather information on where work is performed, the manual number(s) to which payroll should be reported, and/or where an injury occurred as well as what an injured was doing at the time of injury.  This will enable the PEO to supply the correct information to BWC in reporting claims and payroll. In most cases, the proper manual number can be obtained from the person responsible for filing the client’s workers’ compensation payroll reports.

 

·        By virtue of the PEO becoming the employer as respects a Full or Partial Agreement, the underlying injury claims will be charged against a PEO depending upon the Agreement as to which policy the payroll is being reported against as “claims must follow the reporting of payroll.”

 

·        Note: BWC staff should use WCIS screen UW520S to determine by Policy, the Full or Partial Lease type, Effective and End date as well as which party is responsible for Payroll and claims reporting.

 

 

Violation of Specific Safety Requirement (VSSR)

 

·        In the event a Violation of Specific Safety Requirement (VSSR) award is granted, the Industrial Commission (IC) will determine to which policy the VSSR should be charged.  The IC may order the VSSR award to the same employer policy against which the underlying injury claim is charged.

 

·        However, once the IC determines and orders the VSSR % Award against the employer to which it is to be charged, BWC will start making VSSR payments to the injured worker and bills the employer for reimbursement.  This will continue based upon compensation payments made in the injured workers claim and will continue to be the responsibility of such employer for the life of the claim regardless of the experience period or rating plan.  Only the IC can settle a VSSR claim which must first be done before BWC can settle the underlying claim on which the VSSR is based.

 

·        In general, if the PEO Agreement reports client payroll using the client’s policy number, the client may be responsible for any VSSR and No Coverage claim charges.  If the PEO reports payroll under its own PEO policy, the PEO or client may share responsible for VSSR charges on injuries incurred after the effective date of the Agreement but the client policyholder is always responsible for “No coverage” claims and related VSSR.

 

·        It is important to remember that VSSR awards are paid as a percentage of compensation claims cost and will continue to be charged to the responsible policy for as long as the claim cost are incurred, regardless of whether the underlying injury claim is still in the experience period.  Only the IC can settle a VSSR claim and this must be done before BWC is permitted to settle the underlying injury claim which the PEO can then approve as the employer unless the client contracts to report all or part of its own payroll and claims under the PEO (Full or Partial Lease agreement - refer to WCIS screen UW520S to determine type of contract).

 

 

Staff Leasing/Professional Employer Organization (PEO) (OAC 4123-17-15)

 

·        Staff leasing/professional employer organization (PEO) means a person or employer that arranges with one or more client employers under written contract to employ all (Full Lease) or part (Partial Lease) of the work force for a client employer and to place those assigned workers on a permanent basis to the client employer.

 

·        PEOs are not the same as Temp agencies as the arrangement with a PEO is intended to be ongoing rather than temporary in nature.

 

·        Claims for non-complying employers who enter a staff leasing/professional (PEO) employer arrangement remain with the non-complying client employer. Such non-complying claims are not assigned to the PEO.

 

·        BWC’s PEO unit initially sets up all PEO contract arrangements and completes the appropriate experience transfers in establishing and/or cancelling the PEO/client contracts and accounts in WCIS.  After the initial PEO/client relationships are identified and established and the correct employer of record and account activity is transferred by the PEO unit, subsequent change of an erroneous policy number on any new claims in V3 and documentation of all actions in the V3 notes will be done by BWC’s PEO Unit which may require claim/other correspondence to be reissued to interested parties of the claim.

 

 

General Information Applying to PEOs

 

·        The PEO is considered the employer for complying employer claims.  However, claims for non-complying employers who enter a staff leasing/professional employer (PEO) arrangement are left with the non-complying client employer.

 

·        The PEO by law is the Employer of Record (EOR) of the staff leased employees during the PEO agreement.  Therefore the PEO have full sign off rights (including LSS authority) and they (PEO) are the only employer recognized for workers compensation (WC) purposes except for situations involving Partial lease and/or Full lease when the employer reports its own payroll and claims under its own policy.

 

·        Accordingly, the PEO industry is very sensitive in matters involving the client employer in WC issues, as this undermines their service.  All correspondence should be directed to the EOR listed in V3.  Since the PEO unit manually changes the EOR to the PEO when a lease is initiated, the PEO will receive the correspondence.  There is no shared employer relationship when it comes to Full PEO Agreements for WC, only one recognized employer, and that is the PEO unless the employer reports its own payroll and losses under its own policy.  (Note: BWC staff should see WCIS UW520S to verify the type of PEO lease agreement).

 

 

Types of lease agreements and the experience transferred to and from the PEO policy for rate-making purposes under each type.

 

·        Full lease agreement payroll/claims reported under PEO

 

The entire experience — up to five years of claims and payroll — of the client employer is transferred to the PEO policy.

 

·        BWC will use the client employer’s experience to calculate the premium rate for the PEO policy.

 

·        The client employer must maintain an active policy during the PEO agreement.

 

·        The client employer will be base rated and report zero payrolls for subsequent reporting periods.

 

·        BWC will change the claims associated with the client employer’s experience to reflect the PEO as the employer of record.

 

·        The client employer and/or PEO will direct the leased employees to file claims using the PEO policy number.

 

·        The PEO will be responsible for reporting all payrolls and paying premiums associated with the client employer from the date of agreement until termination and change in agreement.

 

·        The PEO must maintain accurate records of the claims and payroll at the client level.

 

·        Clients recognized as public employers are not eligible for this type of PEO agreement.

 

 

·        Full lease agreement payroll/claims reported under client

 

The entire experience of the client employer is maintained under the client employers’ policy and no experience is transferred to the PEO. This type of agreement has no impact on the client employer or the PEO experience modifier/premium rates:

 

·        The client employer’s experience will be used solely to calculate the premium rate for the client employer’s policy.

 

·        BWC will calculate the client employer’s premium rate using the existing experience under the client employer’s policy.

 

·        All payroll and claims associated with the client employer will be reported under the client employer’s policy.

 

·        The client employer must maintain an active policy during the PEO agreement.

 

·        The client employer is responsible for ensuring that the appropriate payroll and premiums are reported to BWC.

 

·        The client employer and/or PEO will direct the labor force to file claims using the client employer policy number.

 

 

·        Part lease agreement payroll/claims reported under PEO

 

Only the portion of the client employer’s experience — up to five years of claims and payroll — involved in the PEO lease agreement is transferred to the PEO policy. In a part lease situation, splits of manual classifications, departments, divisions or operations between the PEO and the client may not be done in situations, such as, but not limited to, union vs. non-union employees, hourly vs. salaried employees or part-time vs. full-time employees. 

 

·        BWC will use the portion of the client employer’s experience involved in the PEO lease agreement to calculate the premium rate for the PEO policy.

 

·        BWC will calculate the client employer’s premium rate using the existing experience under the client employer policy that is not included in the PEO agreement.

 

·        The client employer must maintain an active policy during the PEO agreement.

 

·        The client employer must report payroll and pay premiums for the employees not included in the PEO agreement for subsequent reporting periods.

 

·        BWC will change the claims associated with the client employer’s portion of the experience included in the PEO agreement to reflect the PEO as the employer of record.

 

·        The client employer and/or PEO will direct the leased employees included in the PEO agreement to file claims using the PEO policy number.

 

·        The PEO will be responsible for reporting the portion of the payroll and paying premiums associated with the client employer from the date of agreement until termination and change in agreement.

 

·        The PEO must maintain accurate records of the claims and payroll at the client level.

 

·        The client employer is responsible for ensuring that the appropriate payroll and premiums are being reported to BWC under the client employers’ policy.

 

·        Clients recognized as public employers are not eligible for this type of PEO agreement.

 

 

·        Part lease agreement payroll/claims reported under client

 

The entire experience of the client employer is maintained under the client employer’s policy and no experience is transferred to the PEO.

 

·        BWC will use the client employer’s experience solely to calculate the premium rate for the client employer’s policy.

 

·        BWC will calculate the client employer’s premium rate using the existing experience under the client employer policy.

 

·        The client employer will report all payroll and claims associated with him/her under his/her policy.

 

·        The client employer must maintain an active policy during the PEO agreement.

 

·        The client employer is responsible for ensuring that the appropriate payroll and premiums are being reported to BWC.

 

·        The client employer and/or PEO will direct the labor force to file claims using the client employer policy number.

 

 

Additional Guidelines

 

·        In a part-lease situation, splitting of manual classifications, departments, divisions or operations between the PEO and the client may not be done in situations, such as, but not limited to: union vs. non-union employees; hourly vs. salaried employees; or part-time vs. full-time employees. PEOs should forward such requests to BWC's PEO unit for approval.

 

·        If the client employer is self-insured (S-I), classify state fund (SF) PEO workers in the same manner as if the client employer were in the SF unless the PEO is also S-I.  Injuries to SF workers will remain with a SF PEO as a SF claim cannot be transferred back to S-I employer clients or via versa at the end of a PEO agreement.

 

·        PEO employers must be able to identify individual wages per reporting period, per client employer by policy # and by manual (NCCI) for each period. If an employee is assigned to multiple manuals in a period, there must also be a total available for each manual each period. PEO employers should maintain detailed worksheet(s) for each six-month period which would enable an auditor to track the payroll of individual client employees:

 

·        by the company they worked for, with the appropriate NCCI manual assigned to that employee’s wages and subtotaled each period of the audit;

 

·        that relate the gross payroll of employees assigned to each manual, by client, and be able to follow the individual employee’s totals per period to the sum of payroll in each manual;

 

·        to verify duties of employees that work for employers with more than one NCCI manual; and

 

·        to verify the manual(s) assigned to claims of a given PEO employer are, in fact, the NCCI manuals assigned by BWC to the client employer policy for which the injured was working at the time the injury occurred.

 

The above is needed to provide verifiable segregation of all PEO’s wages and manual classification by client, for each six-month reporting period to assure compliance with BWC’s PEO requirements, BWC Audit requirements and NCCI classification rules.

 

·        Gross payroll reported to the Ohio Department of Job and Family Services (ODJFS) should match the gross payroll figures for the Ohio employees for each reporting period. If discrepancies in the payroll figures cannot be explained (i.e., the client reports their own Workers’ Compensation claims and payroll), BWC should use the higher amount and assign discrepancies to the highest rated manual assigned to the client per NCCI.

 

·        A PEO can participate in alternative rating programs such as group rating, Drug-Free Safety Program and retrospective rating, however, they are subject to meeting the applicable underwriting criteria for those particular programs.

 

·        An employer must maintain an active workers' compensation policy with BWC to enable BWC to establish a relationship between the PEO and the client employer. It also is necessary in order for BWC to migrate the appropriate payroll and claims experience back to the client employer upon termination of the PEO/client relationship.

 

·        BWC will not recognize a PEO agreement between a PEO and an out-of-state client employer where the employees of the out-of-state client employer do not meet the jurisdictional requirements to receive Ohio workers’ compensation benefits as provided.

 

·        An employer who becomes a client of a PEO with all payroll and claims for that client reported under the PEO's policy, the MCO of the client will be changed to the MCO of the PEO. An employer who becomes a client of a PEO but continues to report payroll and claims under its own policy will continue to use the MCO assigned to its policy. In a partial relationship where the PEO only takes on a portion of the client's employees, the client will continue to use the MCO assigned to its policy for the employees it retains, and the PEO’s MCO will manage the claims for the employees reported to the PEO’s policy.

 

·        PEOs are required to notify BWC in writing within 30 days of all new PEO agreements or changes in payroll reporting.

 

·        PEOs are required to notify BWC in writing within 14 days of all terminated PEO agreements or changes in payroll reporting.

 

·        The client is responsible for reporting any payroll or claims under its own policy number up until the effective date of the PEO agreement. If an agreement is terminated in the middle of a payroll reporting period, the client is responsible for reporting payroll and claims under its own policy number from the effective date of the agreement termination forward.

 

·        The employer (PEO or client) listed as the employer of record for the claim will have authorization to approve the claim settlement.

 

·        Depending on the type of PEO agreement, the client employer is transferring (or outsourcing) all or part of its workers’ compensation liability and experience, not to mention the function of managing the workers’ compensation responsibilities, to the PEO. The PEO ensures that all aspects of the client employer's workers’ compensation policy are maintained. The PEO assumes the responsibility of reporting payroll and premium for the shared employees in addition to handling claim management responsibilities.

 

·        BWC follows OAC 4123-17-02 when calculating the premium rate for the PEO. The process involves transferring the experience of each client employer of the PEO to the PEO policy to create a combined experience modifier. The PEO will use this rate to pay premiums for shared employees, in addition to the PEOs administrative staff. Any PEO agreement where the PEO elects to report premium under the client policy will not have any experience transferred to the PEO policy. The PEO will report this premium using the individual client employer's calculated experience modifier. Note: The PEO must report shared employees payroll and pay premiums using the manual classifications assigned by BWC to the client employer's policy.

 

·        Make sure all claims are coded to the proper manual number assignable to the employee at the time of injury.  Contact BWC for domestic or sole proprietor or other manual classification information. Information about Understanding PEOs is also available at

 

 https://www.bwc.ohio.gov/employer/services/PEO/default.asp, or call 1-800-OHIO BWC and follow the options, or contact BWC's PEO Unit responsible for all PEO administrative changes at (614) 466-6773.

 

·        BWC has the right to deny or revoke the registration of any PEO who fails to comply with requirements pursuant to OAC 4123-17-15 and/or Ohio Revised Code (ORC) 4125. If the BWC administrator revokes PEO status, the PEO is not permitted to enter into any contracts to co-employ a work force in Ohio.

 

 

Customers Impacted

 

·        Internal Customers

 

·        IM – EM Central and Field Staff

 

·        Compliance and Actuarial Staff

 

·        The integrity of WCIS, V-3 and other systems

 

·        External Customers

 

·        Temporary Service Agencies

 

·        Professional Employer Organizations

 

·        State Fund Insured and Self-Insured Employers

 

·        Accounting, bookkeeping and payroll services doing books for PEO or Temps

 

 

Scenarios, Examples and Questions & Answers

 

1.     How a PEO can obtain the proper manual classifications assigned to a client or prospective client for payroll and claims reporting?

 

·        The PEO should be encouraged to contact the client or prospect first who will always have this information as relates to their own policy and know exactly what their employees do.

 

·        To do otherwise by a PEO to provide a quick answer or quote to keep or secure business before a competitor is an attempt to take shortcuts which may lead to costly mistakes by the PEO:

 

·        This will become evident if the proper manuals are not used by the PEO and the account is later audited and billed additional premium;

 

Or

 

·        Claims charged to the incorrect manual may cause an adverse effect to the Experience Modifier causing the PEO to incorrectly price their services.

 

·        PEO contacting the local service office or Customer Contact Center (1-800-OHIO BWC (and follow the options) to obtain the policy and manual number can be provided the following procedures of how a PEO risk section and/or sales staff can obtain risk numbers, e-mod and NCCI classifications.  This info can be obtained in a few minutes as risk numbers can be obtained from BWC the website www.bwc.ohio.gov:

 

·        For the risk number; select "Coverage Look-up" and enter employer name and city to get the risk number - .

 

·        The rest of the information is available from the automated 800-OHIO BWC number which should allow any PEO, staffing company or anyone else to obtain the proper NCCI classes in but a few minutes.

 

·        The automated attendant will provide details on the policy including whether it’s coverage is Active or Lapsed, participates in a group rating program or other premium reducing programs (i.e. drug free workplace, etc...) and the experience modifier (EM) for the company.  For example, a company in a group rating program or having lower than expected loss cost on their own may be qualified for a substantially reduced EM of less than 1.00 whereas penalty rated employers may have a substantially increased EM more than 1.00 indicating severe claim loss cost experience possibly from poor safety practices and/or simply a run of bad luck:

 

·        Call BWC at 1-800-OHIO BWC and follow the options.

 

 

2.     Employers looking for PEO

 

·        Employers considering or looking for a PEO to contact or compare services can use the BWC website feature to determine who they might wish to contact.  The PEO look-up allows potential client employers to search for a professional employer organization (PEO) by policy number, PEO name, federal tax ID/SSN or simply “click” the “Display all PEOs” box.  BWC only list PEOs who are in compliance with Ohio requirements and registered with BWC. Users also can verify registration and certification status, and demographic information of a specific PEO by entering a policy number, employer name or federal tax ID/SSN, and click search.

 

·        A PEO should always be able to first obtain the policy number and NCCI manual classification from their client since all PEOs know who their clients are.  The policy # and NCCI manual #s information was submitted prior to the client/PEO relationship being certified. PEOs having other questions should contact the local BWC customer service office or Customer Contact Center (1-800-OHIO BWC).  However, in requesting the addition of new manual(s) to the PEO account, the matter should be referred directly to the PEO Unit at (614) 466-6773 due to the complexity of specific and various PEO requirements:

 

·        When dealing with a PEO it is important to know whether the contract with their client are “Full” or “Partial” and the manual number(s) assignable to each and whether the client reports claims and payroll using its own policy or that of the PEO.  “Experience Period” payroll and claims will be transferred back to the PEO client anytime the PEO contract is cancelled unless the PEO or client is self-insured or the client is already reporting its payroll and claims under its own policy.  A VSSR may become a shared cost to a PEO or may remain solely the responsibility of the client employer depending upon the award by the Industrial Commission (IC).  Contrastingly, Temporary Agencies (Temp) payroll and claims will always remain with a Temp except for any VSSR claims allowed against the client which will remain the responsibility of the client employer, not the Temp.

 

·        Regardless of business type, OAC 4123-17-08(D) states, in part, “The purpose of the classification procedure is to assign the one basic classification that best describes the business of the employer within a state.  Subject to certain exceptions described in this rule…..It is the business that is classified, not the individual employments, occupations or operations within a business….”

 

·        A task may be considered incidental and/or includable in a manual already assigned the client’s business and may not otherwise be reportable to its own assigned governing classification; or

 

·        Clients assigned only standard exception manual(s), i.e.; 8810, 8742, etc. with the PEO services provided not contemplated therein (such as delivery driver, long or short haul trucking, janitorial or maintenance staff, etc.) might require adding additional manual(s) to the PEO policy to enable reporting such payroll/claims accordingly;

 

·        Senate Bill 7 restricts releasing claims information but does not restrict providing Employer Information concerning “Coverage Status, Manual Number(s) or Rating Plan”.

 

·        Once a client employer contracts with a PEO, the PEO will then co-employ the client's work-site employees. Among the PEO work-site employee and client employer, there exists a co-employment relationship in which both the PEO and client employer have an employment relationship with the worker. The PEO and client employer will share responsibilities and liabilities.

 

·        PEOs also must list the manual classifications for the client employers if they report payroll under their policy If the PEO agreement between a PEO and a client employer is terminated, the PEO must notify the bureau and each client associated with that PEO within 14 days from the effective date of termination and identify the portion of the experience related to the client employer that will be transferred to the client employer.

 

 

3.     What are the effects of PEO agreements on PEO Rates?

 

·        If the PEO chooses to report the client’s payroll or a portion of it under the PEO’s policy number, BWC’s PEO Unit will transfer the appropriate experience period payroll and claims losses from the client to the PEO. BWC will combine the payroll and the claims losses related to the new client with the PEO’s existing payroll and claim losses, and recalculate the experience modification.

 

 

4.     How else can a PEO obtain experience information on a potential client employer?

 

·        PEOs may obtain payroll and claims data on a potential client employer not in a PEO arrangement by submitting a Temporary Authorization to Review Information (AC-3) signed by the potential client employer.

 

·        PEOs may obtain payroll and claims data on a potential client employer in a PEO arrangement, when the potential client employer’s payroll and claims are reported to the client policy number, by submitting an AC-3 signed by the client employer.

 

·        BWC cannot release any claims or payroll information on a client employer that is in a partial or full PEO arrangement when any payroll and claims are reported to the PEO’s policy number.

 

·        The client employer must establish and maintain an active workers' compensation policy with BWC to enable it to establish a relationship between the PEO and the client employer. It's also necessary so BWC can migrate the appropriate payroll and claims experience back to the client employer upon termination of the PEO/client relationship.

 

 

5.     When a PEO does not pay premium on behalf of its client(s) there are certain requirements that BWC has established in an attempt to protect the client.

 

·        A PEO is required to provide security in the form of a bond or letter of credit in the amount of the workers’ compensation premiums incurred for the two most recent payroll reporting periods.

 

·        As an alternative to providing security in the form of a bond or letter of credit, BWC permits a PEO to make advance payments of prospective premiums and assessments to BWC or submit proof of being certified by either a nationally recognized organization approved by BWC that certifies PEOs or by a government entity approved by BWC.

 

·        Clients will not be held responsible for any unpaid payroll premiums due to the default/bankruptcy of their respective PEOs.

 

 

6.     PEOs must maintain records at the client level.

 

·        PEOs are required to maintain complete records, separately listing the payroll and claims of their client employers for each payroll reporting period. The payroll shall be kept in a manner that clearly identifies the appropriate manual classifications assigned to each client employer to which the payroll should be reported and the amount of premiums paid. PEOs shall identify claims separately according to the client employers. PEOs are obligated to maintain these records and must report them to BWC on a biannual basis or upon request from BWC or any other state agency

 

·        A PEO assumes the responsibility of handling human resource and workers’ compensations functions for all or part of a client's already established work force on a permanent basis.

 

 

7.     When an employer becomes a client of a PEO and the employer has a different managed care organization (MCO) than the PEO, which MCO will handle the claims activity?

 

·        An employer who becomes a client of a PEO and all payroll and claims for that client are reported under the PEO's policy, the MCO of the client will be changed to the MCO of the PEO.

 

·        An employer who becomes a client of a PEO but continues to report payroll and claims under its own policy will continue to use the MCO assigned to its policy.

 

·        In a partial relationship where the PEO only takes on a portion of the client's employees, the client will continue to use the MCO assigned to its policy for the employees it retained, but the PEO’s MCO will manage the claims for the employees reported to the PEO’s policy.

 

·        If a PEO/client relationship is terminated, the client returns to the MCO he/she had prior to contracting with the PEO.

 

·        Note: A client who has been with his/her PEO from the beginning of his/her operation and has not selected an MCO through MCO open enrollment can choose an MCO upon termination.

 

 

8.     Can a PEO contract with an out-of-state employer?

 

·        BWC will not recognize a PEO agreement between an Ohio-based PEO and an out-of-state client employer in which the employees for the out-of-state client employer do not meet the jurisdictional requirements to receive Ohio workers’ compensation benefits as provided in ORC section 4123.54.

 

 

9.     Public employer guidelines

 

·        Any public employer that enters into a PEO agreement will retain the reporting of payroll and claims under the employer’s policy number. The PEO may not report any of the public employer’s payroll or claims under its policy number.

 

 

10.  Self-insuring PEO guidelines

 

·        When a self-insuring PEO initiates a PEO agreement with a client employer, the client employer’s claims and payroll history remain under the client policy and the claims will continue to be paid out of the state fund.

 

·        Under the PEO agreement, all claims and payroll associated with the client employer will be assigned to the self-insuring PEO policy. Any claims associated with the shared employees will be labeled self-insuring claims and will remain assigned to the PEO policy for the duration of the claim.

 

·        Upon PEO agreement termination, the payroll and claims incurred during the period of the agreement will remain with the self-insured PEO policy and will not be returned to the client employer’s policy.

 

 

11.  Retrospective rating PEO guidelines

 

·        Upon initiation of the PEO agreement, in which the retrospective-rated PEO reports all or part of the client employer’s payroll and claims under the PEO policy, BWC will transfer the appropriate experience from the client to the PEO policy. Also, any claims associated with the client employer incurred during the retrospective period will be permanently labeled as retro claims.

 

·        Upon initiation of the PEO agreement, in which the PEO reports all or part of the retrospective-rated client employer’s payroll and claims under the PEO policy, BWC will transfer the appropriate experience from the client to the PEO policy for rate making and claims management purposes. Also, any claims associated with the client employer incurred prior to the initiation of the PEO agreement and labeled as retro with the client will be included in the client employer’s annual retrospective evaluation.

 

 

12.  PEO requirements

 

·        Notify all share employees that they are employed by the PEO.

 

·        Pay wages and related taxes from the PEO’s own accounts — This criterion is not contingent upon receipt of payment from clients.

 

·        Maintain workers’ compensation coverage, pay all workers’ compensation premiums and manage all workers’ compensation claims, filings and related procedures associated with shared employees or employees of operations assumed by the PEO.

 

·        Comply with applicable state laws regarding workers’ compensation insurance coverage.

 

·        Notify BWC in writing within 30 days of all new PEO agreements, contract terminations and changes in payroll reporting from the PEO to the client, or from the client to the PEO or portion of employees assumed by the PEO.

 

·        Maintain complete records separately listing the manual classifications of each client employer and the payroll reported to each manual classification for each client employer for each payroll reporting period during the time period covered in the PEO agreement.

 

·        Maintain a record of workers’ compensation claims for each client employer.

 

·        Within 14 days after receiving notice from BWC that a refund or rebate will be applied to workers’ compensation premiums, provide a copy of that notices to any client employer to whom that notice is relevant.

 

 

13.  Before BWC recognizes a PEO agreement with a client, the following requirements apply:

 

·        The PEO must ensure the client has active, reinstated or debtor in possession (DIP) status.

 

·        The PEO must ensure the client will keep its account active throughout the life of the PEO contract.

 

·        The PEO must maintain active, reinstated or DIP status at all times.

 

·        The PEO must notify BWC using the Professional Employer Organization Client Relationship Notification (UA-3) about all new and terminated client relationships, and any change in payroll reporting from the PEO to the client or from the client to the PEO, or change to portion of employees affected by the relationship. The PEO must complete the UA-3 in its entirety, including.

 

·        PEO and client policy number;

 

·        Agreement effective date;

 

·        Agreement type (full or part);

 

·        Policy number under which payroll will be reported;

 

·        Manual classification codes covered by PEO;

 

·        Client signature (new agreements only);

 

·        The PEO may send the notifications by mail, fax or e-mail. BWC will not recognize new, terminated and/or changes to existing relationships without the submission of this form. BWC will treat the client employer’s account per the last form submitted or consider him or her the employer of record if no form is submitted;

 

·        In the event a PEO enters into a contract with a new employer, BWC will not recognize the relationship until the bureau has assigned the new employer a policy number. An accounting of all payrolls of the new employer must be made. This includes any prior-to-coverage payrolls — payroll that was paid prior to the effective date of the new employer’s coverage;

 

·        If we discover a PEO has reported payroll and claims on behalf of an employer who has never obtained a valid BWC policy, we will not recognize the contract. We cannot recognize a contract that never existed; therefore, any claims or payroll that occurred for the duration of the relationship will not be moved to the client. Additionally, a PEO who contracts with an employer who does not have a valid BWC policy number could be subject to a possible revocation process per Ohio Revised Code 4125 or a fraud investigation.

 

·        BWC will not consider a PEO that fails to meet the above criteria as the employer of record for workers’ compensation purposes. In this situation, the PEO’s clients will be responsible for reporting payroll, paying premium and having any claims charged against their policy numbers. Additionally, if the PEO fails to comply with the requirements pursuant to ORC 4125, BWC may revoke the PEO status, thus, the PEO will not operate in Ohio and all PEO agreements will be terminated.

 

 

14.  Termination of a PEO lease agreement

 

·        BWC will transfer back all payroll and claims reported under the PEO policy on behalf of the client employer, to the client policy effective the first day of the next payroll reporting period following the termination date of the arrangement, in addition to all experience previously transferred to the PEO policy upon start of the PEO agreement.

 

·        Upon termination of a PEO/client relationship, if the payroll listed on the AC-18 is greater than the amount of payroll within the PEO’s experience for that specific payroll period(s) by manual(s), BWC will bill the PEO for the shortage and the appropriate experience payroll will be returned to the client. Additionally, in the event of BWC discovering that the client payroll reported by the PEO was reported to an incorrect manual classification, BWC will amend the PEO payroll, accordingly. In this case, the bureau will reassign payroll to the appropriate manual classification based upon the client operations, and the PEO will be responsible for any additional billings as a result of these corrections.

 

 

15.  The premium rate calculated for the PEO policy follows the Successorship rules pursuant to OAC 4123-17-02 and ORC 4125.

 

·        BWC will combine the experience of the PEO and each client employer (where PEO assumes reporting responsibilities) to create the appropriate premium rate for the PEO master policy. BWC will consider and calculate experience transfers, both full and in part, the same as for any other state-fund employer.

 

 

16.  Payroll/premium reporting guidelines (state-fund PEO)

 

·        When the PEO reports shared employees’ payroll under the PEO policy, the PEO must report the shared employees’ payroll under the same manual classification assigned to the client employer’s policy.

 

·        The PEO is required to provide BWC with a file listing all payrolls associated with each client employer on a semiannual basis.

 

·        The PEO is not permitted to defer reporting payroll and paying premiums timely due to pending rate adjustments or processing of PEO transactions.

 

·        Wages paid to corporate officers/owners of the client operation will not be subject to the corporate officer maximum reporting guidelines if wages are paid by the PEO under the PEO policy since these individuals are considered employees of the PEO. This guideline also applies to sole proprietors, partners, etc., of the client if paid wages by the PEO under the PEO policy. Sole proprietors, partners and an individual incorporated as a corporation are excluded from the definition of an employee pursuant to ORC 4123.01 and are not subject to the supplemental coverage guidelines if wages are paid by the PEO under the PEO policy since these individuals are also considered employees of the PEO, thus, the PEO must report the payroll associated with these individuals.

 

·        Payroll and premiums associated with client employers that are recognized as public employers are to be reported only under the client employer policy.

 

·        Upon termination of a PEO agreement, the payroll reported under the PEO policy associated with the client employer is reassigned back to the client employer and is identified on the AC-18.

 

·        PEOs are assigned the same manual classifications that apply to their clients. The PEO must report payroll and pay premiums on behalf of the client employer using the manual classifications assigned to the client employer’s policy and in accordance with the client employer’s operation. The PEO is not permitted to report payroll on behalf of the client employer under any manual classification that is not approved and/or officially assigned to the client employer’s policy by BWC. Additionally, in the event of BWC discovering that the client payroll reported by the PEO was reported to an incorrect manual classification, BWC will amend the PEO payroll. In this case, BWC will reassign payroll to the appropriate manual classification based upon the client operations.

 

·        Failure to report payroll under the assigned manual classifications of the client employer or failure to report the appropriate payroll amount on behalf of the client will be subject to premium audit and may be considered fraud.

 

 

17.  Claim reporting guidelines

 

·        The PEO is required to provide BWC with a file listing all claims reported under the PEO policy and associated with each client employer on a semiannual basis.

 

·        Claims, payroll and premiums will be reported under the same PEO or client employer policy as determined by the PEO agreement.

 

·        The PEO must contact the employer performance-PEO unit to have a claim reassigned to another policy.

 

·        Upon termination of a PEO agreement, the claims reported under the PEO policy associated with the client employer's will be reassigned back to the client employer policy and shall be identified on the AC-19 form.

 

 

18.  Jurisdictional clarification

 

·        Under the following scenarios, no transfer of experience will take place between the PEO and the PEO’s client:

 

·        Ohio based PEO with Ohio coverage enters into a PEO agreement with an out-of-state client with no operations in Ohio (not meeting Ohio’s jurisdictional coverage requirement);

 

·        PEO is not permitted to utilize the Agreement to Select the State of Ohio as the State of Exclusive Remedy (C-110) making Ohio the exclusive workers’ compensation remedy for the client employees;

 

·        If a PEO operates in Ohio and has a client that does not operate in Ohio, that client’s payroll and claims are not permitted to be reported to the PEO’s Ohio account.

 

·        Under the following scenarios, Ohio coverage applies and the PEO or client employer cannot use the Agreement to Select a State Other than Ohio as the State of Exclusive Remedy (C-112) to circumvent Ohio law. A client employer must report Ohio employees under the client's Ohio policy or under the PEO’s Ohio policy when:

 

·        PEO is based in a state other than Ohio; Client employer is based in Ohio;

 

·        Client employer is amenable to the Ohio workers’ compensation law. (Ohio’s jurisdictional coverage requirement);

 

·        PEO operates in a state other than Ohio and has an Ohio employer as a client, that PEO must establish workers’ compensation coverage in Ohio;

 

·        The out-of-state PEO is not permitted to cover the Ohio client under another state’s policy.

 

·        An out-of-state PEO has to establish coverage in Ohio as workers’ compensation coverage is required once an employer has an employee within the state of Ohio. When a PEO enters into an agreement with a client, in which the PEO will report the payroll and claims under its policy, coverage is required. The contractual liability essentially makes those individuals the PEO’s employees. This active coverage also allows BWC to move the client’s payroll/claims history to the PEO’s policy to calculate an accurate rate for the employees’ exposures. PEOs are required to follow the same guidelines as any employer in the state of Ohio when they have contracted to take over the employees of their clients.

 

 

19.  Information requests

 

·        PEOs may obtain payroll and claims data on a potential client employer not in a PEO arrangement by submitting a Temporary Authorization to Review Information (AC-3) signed by the potential client employer.

 

·        PEOs may obtain payroll and claims data on a potential client employer in a PEO arrangement, where the potential client employer’s payroll and claims are reported to the potential client’s policy number by submitting an AC-3 signed by the potential client employer.

 

·        BWC cannot release any claim or payroll information on a client employer that is in a PEO arrangement when any payroll and claims are reported to the PEO’s policy number.

 

·        Pursuant to ORC 4125 and OAC 4123-17-15, the PEO’s list of client employers currently in an active PEO agreement is considered trade secret.

 

·        A PEO may obtain access to a potential or current client employer's policy information via bwc.ohio.gov by having the client employer establish designee access to the PEO.

 

·        A PEO is not permitted to create an e-account (user ID and password) on behalf of the client employer to access the client employer’s policy information via bwc.ohio.gov. BWC’s Information Technology Division will terminate any e-account that is not established by the actual employer.

 

 

20.  Client employers recognized as public employer guidelines

 

·        Any public employer entering into a PEO relationship will retain the reporting of payroll and claims under the employer’s policy number. The PEO may not report any of the public employer’s payroll or claims under its policy number.

 

 

21.  PEO-client employer participating in the retrospective-rating program

Retro PEO, non-retro client

 

·        Upon initiation of the PEO agreement where the retrospective-rated PEO reports all or part of the client employer’s payroll and claims under the PEO policy:

 

·        BWC will transfer the appropriate experience from the client to the PEO policy;

 

·        Any claims associated with the client employer incurred during the retrospective period will be coded permanently as retro claims

 

·        A retrospective-rated PEO will be responsible for all retrospective losses reported to its policy during the years of retrospective rating, even if the PEO agreement is subsequently terminated. BWC will use those claims in the PEO’s evaluation period (10-year liability period) and for the calculation of the PEO’s experience modification;

 

·        The retro PEO must abide by the existing PEO reporting rules and guidelines as other non-retro PEOs.

 

·        Upon termination of the PEO agreement where the retrospective-rated PEO has reported all or part of the client employer’s payroll and claims under the PEO policy;

 

·        All payroll and claims associated with the client employer and reported under the PEO policy are transferred back to the client employer’s policy to establish a new experience modifier for both PEO and client employer;

 

·        Any claims coded as retro claims and associated with the client employer will continue to be included in the PEO’s retrospective evaluation; however the client employer will manage the claims.

 

Note: The PEO will no longer have access to management of these claims after termination of the PEO agreement nor is it entitled to claim costs reports because the PEO is no longer considered the employer of record. The PEO must obtain any information pertaining to retro claims assigned to the client employer through the client employer.

 

 

22.  Non-retro PEO, retro client

 

·        Upon initiation of the PEO agreement where the PEO reports all or part of the retrospective-rated client employer’s payroll and claims under the PEO policy:

 

·        BWC will transfer the appropriate experience from the client to the PEO’s policy for rate-making and claims-management purposes;

 

·        Any claims associated with the client employer incurred prior to the initiation of the PEO agreement and coded as retro claims with the client will be included in the client employer’s annual retrospective evaluation;

 

·        A retrospective-rated client will be responsible for all retrospective losses reported to his/her policy during the years of retrospective rating, even if the client enters into a PEO agreement. BWC will use those claims in the client’s evaluation period (10-year liability period) and for the calculation of the PEO’s experience modification.

 

·        Upon termination of the PEO agreement where the retrospective-rated client has reported all or part of the client employer’s payroll and claims under the PEO policy:

 

·        All payroll and claims associated with the client employer and reported under the PEO’s policy are transferred back to the client employer’s policy to establish a new experience modifier for both PEO and client employer;

 

·        Any claims coded as retro claims and associated with the client employer will continue to be included in the client’s retrospective evaluation; however the claims associated with the client employer incurred under the non-retro PEO will be coded as retro claims upon reassigning the claims back to the client employer’s policy, thus, these claims will not be included in the client employer’s annual retro evaluation.

 

Note: The client employer will not have access to manage the retro claims when the PEO agreement is initiated because the PEO is now considered the employer of record. However, the client remains liable for the retro-claim losses and must work with the PEO on sharing claims-management strategies. The client employer must obtain any information pertaining to retro claims transferred to the PEO through the PEO until the agreement is terminated.

 

 

23.  Self-insured guidelines

 

·        For PEOs granted the privilege of self-insurance, the PEOs are permitted to enter into a PEO agreement the same as a state-fund PEO. The PEO may elect to report the paid compensation associated with a specific client employer either under its own policy number or under the client employer’s policy. However there are exemptions in the reporting requirement when the self-insuring PEO reports client employers’ payroll and claims under the self-insuring PEO policy.

 

·        During PEO agreement, all claims and payroll associated with the client employer will be assigned to the self-insuring PEO’s policy. Any claims associated with the shared employees will be coded as self-insured claims and will remain assigned to the PEO’s policy for the duration of the claim.

 

·        Upon PEO agreement termination, the payroll and claims incurred during the period of the agreement will remain with the self-insuring PEO’s policy and will not be returned to the client employer’s policy.

 

·        All the reportable paid compensation or payroll associated with the client, and paid by the PEO, must be reported under one policy number. For example, the PEO cannot split a specific client’s paid compensation or payroll into multiple PEO policy numbers. The paid compensation, payroll and the associated claims losses, when applicable, will always be kept together, under the PEO’s policy number to generate the correct amount of assessments.


Resources