Policy Name:	Alternate Employer Organizations (AEOs) and Professional Employer Organizations (PEOs)
Policy #:	EP-16-04
Code/Rule Reference	ORC Chapters 4125 and 4133; ORC 4123.15; OAC 4123-17-14, 4123-17-15, 4123-17-15.1, 4123-17-15.2, 4123-17-15.4, 4123-17-15.6, 4123-17-15.7, and 4123-17-16.
Effective Date:	July 1, 2023
Approved:	Rex Blateri, Chief of Employer Services
Origin:	Employer Policy
Supersedes:	Alternate Employer Organizations (AEOs) and Professional Employer Organizations (PEOs) Policy effective July 1, 2021.
History:	Revised June 14, 2023; October 18, 2021; March 5, 2019; March 12, 2008. New policy, July 2007.
Review Date:	July 1, 2028

 

 

I.      Policy Purpose

 

The Ohio Bureau of Workers’ Compensation (BWC) is responsible for administering and enforcing ORC Chapter 4125 Professional Employer Organizations (PEOs) and ORC Chapter 4133 Alternate Employer Organizations (AEOs).

 

II.    Applicability

 

This policy applies to: state fund AEOs, state fund PEOs, and their authorized representatives; PEO reporting entities and their authorized representatives; client employers of AEOs, PEOs and their authorized representatives; assurance organizations; and the BWC PEO/AEO Unit.

 

III.   Definitions

A.    Alternate Employer Organization (AEO): A sole proprietor, partnership, association, limited liability company, or corporation that enters into an agreement with one or more client employers for purposes of providing human resource management services and sharing employer responsibility and liability. An AEO does not include a temporary service agency.

B.    Professional Employer Organization (PEO): 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 workforce at the client employer’s work site. PEO does not include a temporary service agency.

C.   AEO agreement: A written contract between a client employer and an AEO to provide human resource management services and to share employer responsibilities and liabilities. Upon entering into an AEO agreement, a client employer’s worksite employees are covered under the AEO’s workers’ compensation policy.

D.   Client employer: A sole proprietor, partnership, association, limited liability company, or corporation that enters into an AEO agreement and shares employer responsibility and liability with the AEO, or that enters into a PEO agreement and is assigned shared employees by the PEO. “Client employer” does not mean a non-complying employer as defined in OAC 4123-14-01.

E.    Co-employ: The sharing of the responsibilities and liabilities of being an employer.

F.    Employer Services Assurance Corporation (ESAC): An independent nonprofit corporation that is an accreditation and financial assurance organization for the PEO industry.

G.   PEO agreement: A written contract to co-employ employees between a PEO and a client employer with a duration not less than twelve (12) months in accordance with the requirements of ORC Chapter 4125.

H.   PEO reporting entity: Two or more PEOs that are majority owned or commonly controlled by the same entity, parent, or controlling person and satisfy reporting entity control rules as defined by the financial accounting standards board and under Generally Accepted Accounting Principles (GAAP).

I.      Shared employee: An individual intended to be assigned to a client employer on a permanent basis, not as a temporary supplement to the client employer’s workforce, who is co-employed by a PEO and a client employer pursuant to a PEO agreement.

J.     Working capital: The excess of current assets over current liabilities as determined by GAAP.

K.    Worksite employee: An individual assigned to a client employer on a permanent basis, not as a temporary supplement to the client employer’s workforce, who is employed by both an AEO and a client employer pursuant to an AEO agreement.

IV.  Policy

A.    Overview:

1.    AEOs provide human resource management services. The AEO relationship involves a sharing of employer responsibility and liability, between the AEO and the client employer, under an AEO agreement.

2.    AEOs must not be considered PEOs. Beginning January 1, 2022, an AEO may not hold itself out, advertise, or otherwise identify itself in any way as a PEO.

3.    PEOs are co-employers. The PEO relationship involves a contractual allocation, and sharing of employer responsibilities, between the PEO and the client employer under a PEO agreement.

4.    BWC is responsible for enforcing ORC Chapter 4125 Professional Employer Organizations and ORC Chapter 4133 Alternate Employer Organizations.

5.    Where an AEO or a PEO is required to give notice, register, or make a report to BWC, the AEO or the PEO must use forms required by BWC. The AEO or the PEO must complete the forms in full, as determined by BWC, for such notice, registration, or report to be effective.

6.    BWC does not use this policy to address AEO or PEO participation in employer programs. See the specific employer program policy for information about AEO or PEO participation.

B.    Registration and reporting requirements.

1.    AEOs and PEOs:

a.    An AEO or a PEO operating in Ohio must apply for coverage with BWC and obtain a BWC policy number.

i.      The PEO must register with BWC by submitting the Professional Employer Organization Registration Application (UA-1) no later than thirty (30) days after the formation of the PEO. The PEO must submit an initial registration fee of $1,000 with its registration.

ii.     The AEO must register with BWC by submitting the Alternate Employer Organization Registration Application (UA-2) no later than thirty (30) days after the formation of the AEO. The AEO must submit an initial registration fee of $1,000 with its registration.

b.    The AEO or PEO must submit the following information when initially registering and when annually renewing registration with BWC:

i.      A list of the AEO’s or the PEO’s client employers current as of the date of the initial or renewal registration. The list must include the employer’s name, address, federal identification number, and BWC policy number;

ii.     The name(s) under which the AEO or the PEO conducts business;

iii.    The addresses of the AEO’s or the PEO’s principal place of business and each office maintained in Ohio;

iv.   The AEO’s or the PEO’s taxpayer or employer identification number;

v.     A list of each state in which the AEO or the PEO has operated in the preceding five years, and the name, corresponding with each state, under which the AEO or the PEO operated, including any alternative names, predecessor names, and if known, successors, and whether the entity is an AEO or a PEO in the other state(s);

vi.   A list of all corporate officers;

vii.  A list of all related corporate entities;

viii. An attestation of the accuracy of the data submissions from the chief executive officer (CEO), president, or other individual who serves as the controlling person of the AEO or the PEO;

ix.   Security as required under ORC 4123.05 and ORC 4133.07; and

x.     The most recent financial statement prepared and audited in accordance with OAC 4123-17-15.4. For initial registration, such financial statement must be no older than thirteen (13) months at the time it is submitted to BWC. For renewal registration, the financial statement must be submitted within one hundred eighty (180) days of the close of the AEO’s or the PEO’s fiscal year.

c.     The AEO must submit a letter of credit assignable to BWC in an amount necessary to meet the financial obligations of the AEO. BWC will determine the amount of the letter of credit, which will be at least $1 million.

2.    PEO reporting entities:

a.    Commonly owned or controlled PEOs may register as a PEO reporting entity or register individually.

b.    A PEO reporting entity completing the financial reporting mandates for commonly owned or controlled PEOs must submit an initial registration fee of $1,000 for each full registration PEO within the PEO reporting entity. The PEO reporting entity must submit the following information when registering and renewing registration with BWC:

i.      A list of each of the PEOs for which the PEO reporting entity will complete financial reporting mandates;

ii.     The name(s) under which the PEO reporting entity conducts business;

iii.    The address of the PEO reporting entity’s principal place of business and the address of each office the PEO reporting entity maintains in Ohio;

iv.   The PEO reporting entity’s taxpayer or employer identification number;

v.     A list of all corporate officers of the PEO reporting entity;

vi.   The most recent financial statement prepared and audited in accordance with OAC 4123-17-15.4. The financial statement must be no older than thirteen (13) months at the time it is submitted to BWC;

vii.  Security as required under ORC 4125.05; and

viii. An attestation of the accuracy of the data submissions from the CEO, president, or other individual who serves as the controlling person of the PEO reporting entity.

3.    BWC may grant limited registration to an AEO or a PEO for reasons specified by BWC in the certificate of limited registration.

a.    The AEO or the PEO must provide all of the following to BWC:

i.      A properly executed Professional Employer Organization Limited Registration Application (UA-1 L) or Alternate Employer Organization Limited Registration Application (UA-2L);

ii.     A fee of $250;

iii.    All information required for registration set forth in sections IV.B.1.b.i through IV.B.1.b.x above; and

iv.   Information and documentation necessary to show the AEO or the PEO satisfies all of the following criteria:

a)    The AEO or the PEO is domiciled outside of Ohio and does not maintain an office in Ohio;

b)    The AEO or the PEO is licensed or registered as an AEO or a PEO in another state;

c)    The AEO or the PEO does not participate in direct solicitations for client employers located or domiciled in Ohio; and

d)    The AEO or the PEO has fifty (50) or fewer worksite employees or shared employees employed or domiciled on any given day. For purposes of this paragraph, an AEO or a PEO is not domiciled outside of Ohio if a commonly owned or otherwise related corporate entity is domiciled or maintains an office in Ohio.

b.    BWC may require security of the limited registration AEO or the limited registration PEO pursuant to ORC 4125.05, ORC 4133.07, and OAC 4123-17-15.2.

c.     All limited registration PEO client employers must report all payroll and claims under the client employer policy for BWC purposes.

4.    Following the initial registration, each PEO and PEO reporting entity must renew its registration and pay the annual renewal fee no later than December 31 of each year. The annual renewal fee must be submitted as follows:

a.    For each full registration PEO, $250.

b.    For each PEO reporting entity, $250 for each PEO within the PEO reporting entity.

c.     For each limited registration PEO, $100.

5.    Following the initial registration, each AEO must renew its registration and pay the annual renewal fee no later than December 31 of each year. The annual renewal fee is $250 for each AEO. The annual renewal fee is $100 for each limited registration AEO.

6.    The AEO or the PEO must provide BWC with an annual report of its client employers and total workforce, by employee, no later than the date determined by BWC.

a.    The report must list all individual employees by client employer; and

b.    For each employee provide identification information, quarterly payroll, associated classification code, title or position, and department.

7.    BWC maintains a list of registered AEOs, PEOs, and PEO reporting entities that is readily available to the public.

8.    The following acts are prohibited:

a.    Beginning on and after January 1, 2022, an AEO that is currently registered in Ohio owning, co-owning, or commonly controlling an AEO, a PEO, or PEO reporting entity that is registered in Ohio; and

b.    Beginning on and after January 1, 2022, a PEO or a PEO reporting entity, that is currently registered in Ohio owning, co-owning, or commonly controlling an AEO that is registered in Ohio.

9.    Except as necessary for BWC and its employees to perform their official duties, all records, reports, client lists, and other information obtained from an AEO, a PEO, or a PEO reporting entity are confidential. These records, reports, client lists and other information will be considered trade secrets and will not be published or open to public inspection.

C.   Financial mandates.

1.    The AEO or the PEO must prepare financial statements in accordance with GAAP and submit them electronically to BWC for registration and registration renewal. For initial registration, such financial statements must be no older than thirteen (13) months at the time of submission to BWC. For renewal registration, the financial statements must be submitted within one hundred eighty (180) days of the close of the AEO’s or the PEO’s fiscal year.

a.    The financial statements must be audited by an independent certified public accountant (CPA).

i.      The resulting report of the auditor must not include either of the following:

a)    A qualification or disclaimer of opinion as to adherence to GAAP; or

b)    A statement expressing substantial doubt about the ability of the AEO, the PEO, or the PEO reporting entity to continue as a going concern.

ii.     If an AEO or a PEO does not have at least twelve (12) months of operating history on which to base financial statements:

a)    The AEO must provide a letter of credit in an amount not less than $1 million as determined by BWC or the PEO must provide a bond or letter of credit in an amount not less than $100,000 as determined by BWC; and

b)    The AEO or the PEO must provide CPA reviewed financial statements until such time the AEO or the PEO can provide GAAP financials within one hundred eighty (180) days of the end of the AEO’s or the PEO’s initial fiscal year. The AEO or the PEO must apply to BWC in writing for an extension of this deadline. The AEO’s or the PEO’s CPA must explain the reasons for the delay.

b.    A PEO reporting entity may submit a combined or consolidated financial statement. If the combined or consolidated financial statement includes entities that are not PEOs, or are not in the PEO reporting entity, the controlling entity of the PEO reporting entity submitting the financial statement must guarantee the PEOs have satisfied the working capital requirements.

c.     If an AEO is a subsidiary, or is related to a variable interest entity, the AEO or AEO entity may submit the AEO’s required financial statements.

2.    An AEO, a PEO, or a PEO reporting entity must maintain positive working capital at initial or renewal registration as reflected in the financial statements submitted to BWC. If a deficit in working capital is reflected in the financial statements submitted to BWC:

a.    The AEO, the PEO, or the PEO reporting entity must submit a quarterly financial statement to BWC for each calendar quarter during which there is a deficit of working capital, accompanied by an attestation of the CEO, president, or other individual who serves as the controlling person of the AEO, the PEO, or the PEO reporting entity that all wages, taxes, workers’ compensation premiums, and employee benefits have been paid by the AEO, the PEO, or members of the PEO reporting entity.

b.    The PEO or the PEO reporting entity must obtain a bond, irrevocable letter of credit, or securities with minimum market value sufficient to cover the deficit in working capital. Such security must be held by a depository designated by BWC. The security will be used by BWC to secure payment by the PEO or PEO reporting entity of all taxes, benefits, or other entitlements due or otherwise pertaining to shared employees, if the PEO or PEO reporting entity does not make those payments when due.

c.     The AEO will provide a letter of credit in favor of BWC at the time of registration which will secure payment by the AEO of all taxes, benefits, or other entitlements due or otherwise pertaining to worksite employees, if the AEO does not make those payments when due.

3.    The BWC PEO/AEO Unit will inform the Employer Services Assurance Corporation (ESAC) when a member PEO has a deficit in working capital. ESAC will review the case and provide BWC its opinion, in writing, of the PEO’s financial solvency.

a.    If ESAC provides a positive endorsement of the PEO’s solvency, ESAC will provide the security for the PEO.

b.    If ESAC does not endorse the PEO’s solvency, BWC will require the PEO to provide security in the form of a surety bond or letter of credit in the amount of the deficit.

c.     BWC may revoke the PEO’s registration if the PEO fails to provide security for the deficit in working capital.

4.    BWC will deny an AEO’s initial or renewal application if the AEO fails to meet all the requirements in policy sections IV.C.1 and IV.C.2.

D.   AEO agreements and PEO agreements.

1.    There are three types of PEO agreements based on the reporting of payroll and claims:

a.    All payroll and claims reported under the PEO policy.

b.    All payroll and claims reported under the client policy.

c.     A portion of payroll and claims reported under the PEO policy. (See Part Leases section below)

2.    Under an AEO agreement, all payroll and claims must be reported under the AEO policy.

3.    The AEO or the PEO must notify BWC within thirty (30) days of entering into an AEO agreement or PEO agreement, or when changing the type of PEO agreement. The AEO, or the PEO for payroll reported under the PEO’s policy, must list payroll within the existing classification codes of the client employer.

a.    A PEO must submit the Professional Employer Organization Client Relationship Notification (UA-3) form.

b.    An AEO must submit the Alternate Employer Organization Client Relationship Notification (UA-4) form.

4.    If BWC is not notified within thirty (30) days of the AEO agreement or the PEO agreement:

a.    The AEO agreement or the PEO agreement will be recognized on the date BWC receives the notice; and

b.    The client employer will be responsible for reporting payroll and claims under its policy until the recognized effective date of the agreement.

5.    Where a client employer enters into an AEO agreement or a PEO agreement:

a.    The client employer must establish and maintain coverage with BWC.

b.    The AEO or the PEO will be considered the succeeding employer, solely for purposes of workers’ compensation experience, and will be subject to OAC 4123-17-02.

c.     When the AEO agreement or the PEO agreement is terminated, the AEO or the PEO declares bankruptcy, or the AEO or the PEO ceases operation in Ohio, the AEO or the PEO must notify BWC and each client employer within thirty (30) days from the effective date of termination. The AEO or the PEO must identify the portion of the PEO’s experience to be transferred to each client employer by submitting forms Labor Lease Transaction – Payroll (AC-18) and Labor Lease Transaction – Claims (AC-19) to BWC.

6.    An AEO agreement or a PEO agreement, or a change in an AEO agreement or a PEO agreement, filed with BWC will have the following effective date for workers’ compensation premium and claims purposes:

a.    If the commencement date of the AEO agreement or the PEO agreement or change in the AEO agreement or the PEO agreement is January 1 or July 1, the commencement date; or

b.    If the commencement date of the AEO agreement or the PEO agreement or change in the AEO agreement or the PEO agreement is not January 1 or July 1, the next January 1 or July 1, whichever is earlier.

7.    If the PEO submits a PEO reporting or part PEO agreement, with an effective date in the middle of the payroll period, BWC will require the PEO to resubmit a new or modified PEO agreement, signed by the client employer, acknowledging all under client PEO agreement.

8.    For payroll reported under the PEO’s policy, the PEO must report payroll within the existing classification codes of the client employer.

9.    An AEO or a PEO who enters into an AEO agreement or a PEO agreement with a non-complying employer, or an AEO or a PEO who fails to comply with OAC 4123-17-15 through 4123-17-15.7, will not be considered the employer for workers’ compensation purposes. In these circumstances:

a.    The payroll and claims of worksite employees or shared employees must be reported under the client employer’s workers’ compensation policy number, unless prohibited by federal law; and

b.    Claims filed by worksite employees or shared employees must be charged to the experience of the client employer.

c.     This policy does not include instances where an AEO or a PEO enters into an AEO agreement or a PEO agreement with a client who has never established a BWC policy. In these instances, all claims and payroll experience will remain with the AEO or the PEO for the period previous to the client establishing a BWC policy number.

10.  BWC will not recognize an AEO agreement or a PEO agreement when the employees of an out-of-state client employer do not have sufficient contacts with Ohio to meet the jurisdictional requirements for coverage.

11.  An AEO or a PEO is prohibited from entering into any AEO agreement or PEO agreement where the client employer is an AEO or a PEO, and BWC will not recognize any AEO agreement or PEO agreement where the client employer is an AEO or a PEO.

12.  An AEO is prohibited from entering into a PEO agreement with a client employer and a PEO is prohibited from entering into an AEO agreement with a client employer.

13.  BWC will assess a $50 late processing fee for each occurrence of an AEO or a PEO failing to:

a.    Notify BWC within thirty (30) days when entering into, or changing, an AEO agreement or a PEO agreement;

b.    Notify BWC or a client employer within thirty (30) days of termination of an AEO agreement or a PEO agreement;

c.     Notify BWC or a client employer within thirty (30) days of declaring bankruptcy; or

d.    Notify BWC or a client employer within thirty (30) days of ceasing operations in Ohio.

E.    Part leases.

1.    A PEO may enter into a PEO agreement to co-employ part of a client employer’s workforce, provided the client employer is not a temporary agency, only to the extent the PEO pays and reports wages under its tax identification number for federal tax purposes.

2.    Under a part lease agreement payroll must be reported to BWC as follows:

a.    The PEO must report under its BWC policy number payroll paid and reported for federal tax purposes under the PEO’s tax identification number.

b.    The client employer must report under its BWC policy number payroll associated with wages not paid and reported under the PEO’s tax identification number.

3.    All of a client employer’s payroll within a classification code must be reported to BWC in its entirety under either the BWC policy number of the PEO or the client employer. Such payroll may not be split between the PEO and the client employer.

F.    Client employer estimated annual premium (EAP) and installments.

1.    All payroll is reported under the client employer’s policy:

a.    The client employer will receive the notice of EAP prior to the beginning of the policy year.

b.    The client employer will follow the installment schedule established at the beginning of the policy year.

2.    All payroll is reported under the AEO or the PEO policy:

a.    New AEO agreement or new PEO agreement: BWC will stop the client employer’s installments as of the effective date of the AEO agreement or the PEO agreement. BWC will recalculate the client employer’s EAP to zero.

b.    AEO agreement termination or PEO agreement termination: BWC will begin client employer installments as of the effective date of AEO agreement termination or PEO agreement termination. BWC will recalculate the client employer’s EAP for the remaining policy year upon request.

3.    A part lease PEO agreement: The payroll is reported under the PEO policy. New part lease PEO agreement: The client employer’s installment schedule remains in place until BWC recalculates the client employer’s EAP to account for the remaining classification codes reported under the client’s policy.

G.   Religious exemption guidelines.

1.    BWC will recognize a religious exemption for an AEO or a PEO and all worksite employees or all shared employees who meet the requirements of ORC 4123.15 as clarified below.

2.    In order for the religious exemption to be applicable to an AEO agreement or a PEO agreement, the exemption must first be established between the client employer and the employee. The client employer and employee must be members of the same religious sect.

3.    As of the effective date of the exemption, the AEO or the PEO is no longer required to report payroll and pay premium and assessments on the worksite employee or shared employee covered by the exemption.

4.    The exemption is valid for all future years unless BWC determines the client employer, the individual worksite employee or the individual shared employee, or the religious sect ceases to meet the requirements for the religious exemption.

5.    BWC AEO requirements or PEO requirements are not affected by any AEO or PEO federal reporting requirements relating to the religious exemption.

H.   Transfers of experience, including unique claim circumstances related to Retrospective Rating, Deductible Program, and Group Retrospective Rating Program participation.

1.    There is no transfer of experience when the client employer is a public employer taxing district (PEC employer).

2.    Pursuant to a PEO agreement, BWC will transfer the appropriate experience period payroll and claims from the client employer to the PEO to calculate the PEO’s experience modification (EM) when the PEO elects to report all, or a portion, of the payroll and claims under its policy.

3.    Pursuant to an AEO agreement, BWC will transfer the appropriate experience period payroll and claims from the client employer to the AEO to calculate the AEO’s EM.

4.    A client employer entering into an AEO agreement or a PEO agreement will not transfer program participation liabilities from the client employer to the AEO or the PEO.

5.    Claims that occur prior to the AEO agreement or the PEO agreement will continue to be included in the client employer’s program participation for:

a.    Retrospective Rating. The claims will be used in the client employer’s annual Retrospective Rating premium adjustment.

b.    Deductible Program. The client employer will continue to be billed for Deductible Program claim costs.

c.     Group Retrospective Rating Program. The claims will be used in the client employer’s Group Retrospective Rating premium calculation.

6.    Claims that occur prior to the AEO agreement or the PEO agreement will not be included in the AEO’s program participation or the PEO’s program participation for:

a.    Retrospective Rating;

b.    Deductible Program; and

c.     Group Retrospective Rating Program.

7.    The termination of an AEO agreement or the termination of a PEO agreement will not transfer program participation liabilities from the AEO or the PEO to the client employer.

8.    Claims that occur during the AEO agreement or the PEO agreement will continue to be included in the AEO’s program participation or the PEO’s program participation for:

a.    Retrospective Rating. The claims will be used in the AEO’s annual Retrospective Rating premium adjustment or PEO’s annual Retrospective Rating premium adjustment.

b.    Deductible Program. The AEO or the PEO will continue to be billed for Deductible Program claim costs.

c.     Group Retrospective Rating Program. The claims will be used in the AEO’s Group Retrospective Rating premium calculation or the PEO’s Group Retrospective Rating premium calculation.

9.    Claims that occur during the AEO agreement or the PEO agreement will not be included in the client employer’s program participation for:

a.    Retrospective Rating;

b.    Deductible Program; and

c.     Group Retrospective Rating Program.

10.  An AEO’s EM or a PEO’s EM is recalculated two times per year or upon request with due cause and BWC PEO/AEO Unit approval.

I.      AEO and PEO obligations.

1.    An AEO or a PEO must perform all of the following functions:

a.    Maintain payroll and claims records for each of the AEO’s or the PEO’s client employers for each payroll reporting period.

i.      Payroll records must clearly identify the appropriate classification codes assigned to each client employer, the payroll reported in each classification code, and the premiums paid for each client employer for each payroll period covered by the AEO agreement or the PEO agreement.

ii.     Claims records must be separately identified according to the client employer.

b.    Report individual client employer payroll, claims, and classification code data under a separate and unique subaccount with BWC.

c.     Maintain workers’ compensation coverage, pay all workers’ compensation premiums, and manage all workers’ compensation claims, filings, and related procedures associated with worksite employees or shared employees. When worksite employees or shared employees are ministers or elective coverage persons as defined in OAC 4123-17-07, the AEO’s payroll report or the PEO’s payroll report must include the entire amount of payroll associated with these persons and will not be subject to the weekly minimum and maximum provided in OAC 4123-17-30.

d.    When an AEO or a PEO is reporting client employer payroll for a sole proprietor or a partner pursuant to an AEO agreement or a PEO agreement, the AEO or the PEO is to use the following guidelines for reporting the sole proprietor’s or partner’s earnings:

i.      The full earnings of sole proprietors and partners of client employers under an AEO agreement or a PEO agreement are reportable.

ii.     For a sole proprietor, the AEO or the PEO reports the Net Profit from the federal Form 1040 Schedule C. Losses are not deductible.

iii.    For a partner, the AEO or the PEO reports the Ordinary Income from the federal Form 1065 Schedule K-1, plus any Guaranteed Payments to Partners, less Section 179 depreciation. Losses are not deductible.

iv.   The AEO or the PEO uses the business’ year-end tax return that falls in the policy year for reporting. If the tax return is not completed, the AEO or the PEO estimates the net income and adjusts the monthly reporting once the tax return has been filed.

v.     Sole proprietors and partners reporting no earnings are not considered employees and as such, are not covered in the event of a workplace injury. Individuals performing unpaid services for a client employer, including a non-profit, are not covered under workers’ compensation.

vi.   Under an AEO agreement or a PEO agreement where the client employer files its business taxes as a sole proprietorship, a partnership, or an individual incorporated as a corporation (ICORP), the owners are not considered employees of the sole proprietorship, partnership, or ICORP and for them, coverage is elective.

e.    Within fourteen (14) days of receiving notice from BWC that a dividend, refund, or rebate will be applied to workers’ compensation premium, the AEO or the PEO must provide a copy of such notice to any client employer to whom the notice is relevant.

f.      Within thirty (30) days after receiving a dividend, refund, or rebate that is applied to workers’ compensation premiums, either fully redistribute or fully credit the client employer to whom that dividend, refund, or rebate is relevant.

2.    An AEO must perform all of the following functions:

a.    Annually provide written notice to each worksite employee of the relationship between, and the responsibilities of, the AEO and the client employer.

b.    An AEO must process and pay all wages and applicable state and federal payroll taxes associated with worksite employees under the client employer’s federal tax identification number, either directly by the AEO or through a third party vendor contracted by the AEO that is not a client employer, irrespective of payments made by the client employer, as established in the terms and conditions of compensation in the AEO agreement.

c.     An AEO must pay all related payroll taxes associated with a worksite employee under the federal tax identification number of the client employer, independent of the terms and conditions contained in the AEO agreement.

d.    An AEO must annually certify to BWC that all client employer federal payroll taxes have been timely and appropriately paid, and upon BWC request, the AEO must provide proof of payment.

e.    List the client employer on the W-2 of all worksite employees, but the AEO remains jointly and severally liable for all applicable local, state, and federal withholding and employer-paid taxes with respect to the worksite employees.

f.      File federal taxes entirely under the client employer’s tax identification number but remain jointly and severally liable for all wages and payroll taxes associated with worksite employees.

g.    If a client employer fails to transmit sufficient payment to the AEO to cover payment of all wages and employer-paid taxes, the AEO must keep a record of the nonpayment or underpayment and record that the AEO nonetheless paid the wages and taxes owed.

h.    Not provide partial or split workers’ compensation coverage for worksite employees in which the client employer provides that coverage for some, but not all, of the client employer’s worksite employees.

3.    A PEO must perform all of the following functions:

a.    Provide written notice to each shared employee of the relationship between, and the responsibilities of, the PEO and the client employer.

b.    The PEO must pay wages and payroll taxes associated with shared employees as established in the PEO agreement, either directly by the PEO or through a third party vendor contracted by the PEO that is not a client employer. The responsibility for making these payments is not contingent on receipt of payment from the client employer. Shared employee wages must be paid by and reported under the PEO’s tax identification number for federal tax purposes. A PEO may only enter into agreements in which all employees of the client employer are shared and reported under the PEO’s tax identification number for federal tax purposes, but reported under the client employer’s policy number for workers’ compensation purposes, when:

i.      The client employer’s payroll is wholly reported under the PEO employer’s tax identification number for federal tax purposes; and

ii.     The client employer’s payroll is wholly reported under the client employer’s policy number for workers’ compensation purposes.

c.     Maintain adequate and required employment related records for employees and for reporting such information as required by appropriate governmental agencies.

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

e.    Maintain workers’ compensation coverage under its policy number for all payroll reported under its tax identification number for federal tax purposes, except as provided in section IV.I.3.b.

J.     Reporting of payroll and payment of premium.

1.    The AEO or the PEO must electronically report payroll on BWC’s web site for each month no later than the fifteenth day after the last day of the month for which the payroll is being reported.

2.    The AEO or the PEO must pay all premium and assessments concurrently with the monthly reporting of payroll.

3.    If the AEO or the PEO fails to make timely payment of premium and assessments, the AEO’s or the PEO’s coverage will lapse, and BWC will revoke the AEO’s registration pursuant to ORC 4133.09 and OAC 4123-17-15.7, or revoke the PEO’s registration pursuant to ORC 4125.06 and OAC 4123-17-15.7.

4.    AEOs or PEOs with zero payroll must file a monthly report.

5.    All client employers must report actual payroll for the preceding policy year and pay any premium due upon reconciliation of estimated premium and actual premium for that policy year. See the Payroll True-Up policy for additional information.

K.    Client employer information.

1.    The AEO or the PEO must provide the client employer with a list of all of the following information upon written request:

a.    All premiums and payroll associated with the client employer;

b.    All workers’ compensation claims, including the compensation and benefits paid, and established reserves for each claim; and

c.     Any other information available to the AEO or the PEO from BWC regarding the client employer.

2.    The AEO or the PEO must provide the information listed above in writing to the client employer within forty-five (45) days of receipt of the written request. The AEO or the PEO has provided the information to the employer when:

a.    The information is received by the US Postal Service; or

b.    The information is personally delivered, in writing, to the client employer. Information sent via email or fax is personally delivered at the time the information is sent by the AEO or the PEO to a valid email address or fax number for the client employer.

3.    The client employer may submit a complaint to BWC if the AEO or the PEO fails to comply with the written request for information.

a.    BWC will investigate the complaint to determine if the AEO or the PEO complied with the request.

b.    If BWC determines the AEO or the PEO failed to comply with the request for information:

i.      BWC will provide the requested information to the client employer. BWC will assess the AEO or the PEO with the costs associated with the investigation and providing the information to the client employer; and

ii.     BWC will notify the AEO’s or the PEO’s client employers of the failure to comply with a request for information and advise the employers of their ability to request such information.

L.    Denial or revocation of AEO or PEO registration.

1.    BWC will deny or revoke the registration of an AEO, a PEO, or a PEO reporting entity if it fails to comply with financial requirements.

2.    BWC may deny or revoke the registration of an AEO, a PEO, or a PEO reporting entity, upon finding the AEO, the PEO, or the PEO reporting entity:

a.    Obtained or attempted to obtain registration through misrepresentation, misstatement of a material fact, or fraud;

b.    Misappropriated any funds of a client employer;

c.     Used fraudulent or coercive practices to obtain or retain business or demonstrated financial irresponsibility;

d.    Failed to appear, without reasonable cause or excuse, in response to a subpoena lawfully issued by BWC; or

e.    Failed to comply with the requirements of OAC 4123-17-15 through 4123-17-15.5.

3.    Concurrent with, or upon, the denial or revocation of the registration of an AEO, a PEO or a PEO reporting entity, BWC may deny or revoke the registration of any AEO, PEO or PEO reporting entity that is majority owned or commonly controlled by the same entity, parent, or controlling person.

4.    The AEO or the PEO may appeal a denial or revocation of status pursuant to the administrative hearing procedure set forth in ORC Chapter 119.

5.    BWC’s decision to deny or revoke an AEO’s registration or a PEO’s registration is stayed pending the exhaustion of all administrative appeals by the AEO or the PEO. BWC may notify client employers of its decision to deny or revoke the registration of the AEO or the PEO provided BWC also notifies client employers the AEO or the PEO has the right to appeal the decision.

6.    Upon revocation of the AEO’s registration or the PEO’s registration, each client employer must file payroll reports and pay workers’ compensation premiums directly to BWC, at a rate determined by BWC, based on the client employer’s individual payroll and claims experience.

7.    If BWC has denied or revoked the registration of an AEO, a PEO or a PEO reporting entity, then any of the following are prohibited from reapplying as an AEO, a PEO, or a PEO reporting entity for a period of two years from the date of denial, revocation, or rescission:

a.    The former AEO, the former PEO, or the former PEO reporting entity; or

b.    Any applicant that is majority owned, or commonly controlled, by the same entity, parent, or controlling person of the former AEO, the former PEO, or the former PEO reporting entity.

8.    If BWC has revoked or denied an AEO’s registration, or a PEO’s registration, and all administrative appeals are not yet exhausted, BWC will notify an employer who inquires of the denial or revocation, and of the fact that the AEO or the PEO has the right to appeal BWC’s decision.

M.   Resolution of complaints.

1.    AEO, PEO, PEO reporting entity, and client employer complaints must be processed under the General Employer Complaint Policy.

2.    BWC has not identified any extenuating circumstances specific to AEOs, PEOs, PEO reporting entities, or client employers.