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OhioBWC - Employer - Service:  PEO

Professional employer organizations (PEOs) - Guidelines

Definitions
Summary of the PEO legislation
Registration and securitization process
Revocation of the PEO registration/certification
Requirements
PEO rate calculations and experience transfer process state-fund PEO to state-fund client employer
Agreement types
Payroll/premium reporting guidelines (state-fund PEO)
Claim reporting guidelines
Jurisdictional clarification
Information requests
PEO – managed care organization (MCO) requirements
Client employers recognized as public employer guidelines
PEO-client employer participating in individual-retrospective rating

Definitions
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 work force at the client employer’s work site. A PEO is a company that provides integrated human resource administration, such as payroll and benefits management, and risk management to its clients in a professional and cost-effective manner.

Client employer — A sole proprietor, partnership, association, limited liability company or corporation that enters into a PEO agreement and is assigned shared employees by the PEO.

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 work force, who is co-employed by a PEO and a client employer pursuant to a PEO agreement.

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

Professional employer organization agreement — A written contract to co-employ employees between a PEO and a client employer with duration of not less than 12 months in accordance with the requirements stated in Ohio Revised Code (ORC) 4125.01.09.

Combined experience modifier — Represents the calculation of the experience modifier for the PEO policy, which includes the PEO administrative payroll and claim history along with all client employers’ experience payroll and claim history. The PEO will use this combined experience modifier to pay premiums for all employees covered under the PEO policy.

Summary of the PEO legislation
The laws pertaining to the PEO industry are included in House Bill 183 (HB 183) (ORC 4125). The bill was approved by the Ohio House and Senate and signed into law by Governor Bob Taft on Aug. 5, 2004. HB 183, which was developed by the Ohio Association of Professional Employer Organizations (OAPEO) with cooperation and support from BWC mandates PEOs register with BWC when operating in Ohio, provide securitization or payment options to cover premium obligations on behalf of the client employer and defines the process of revocation of the PEO status if the PEO fails to comply with law or rule. HB 183 also clarifies the payroll, premium and claim reporting requirements of the PEO for workers’ compensation purposes.

PEO rule (Ohio Administrative Code (OAC) 4123-17-15) was revised to support HB 183 pertaining to workers’ compensation issues listed below.

Registration — PEOs doing business in Ohio are required to register annually with BWC, and all new PEOs must register within 30 days of the formation of the PEO.

Securitization — PEOs are required to provide security in the form of a bond or letter of credit assignable to the bureau. BWC allows PEOs to select an alternative to a bond or letter of credit, and the PEO may choose to make periodic (monthly) prospective payments of premiums and assessments to BWC, or it can submit proof of certification by a nationally recognized organization that certifies PEOs. This requirement ensures that client employers involved in PEO agreements are protected from PEOs who file for bankruptcy and subsequently do not report payroll and submit premium payment on behalf of their clients.

Reporting requirements and clarification — This rule clarifies and defines specific requirements for reporting both PEO and client employer payroll and claim information to the bureau and will result in accurate rate calculations and ensures that appropriate premiums are paid.

PEO notification of BWC dividends — PEOs are required to notify all clients within 14 days after receiving notice from the bureau that a refund or rebate will be applied to workers’ compensation premiums.

Assures PEOs covering clients amenable to Ohio — This rule states BWC will not recognize a PEO agreement between a PEO and an out-of-state client employer where the out-of-state client employer does not meet the jurisdictional requirements for Ohio coverage.

Revocation — BWC will have the right to deny or revoke the registration of any PEO who does not comply with ORC 4125 and this rule. In doing so, the bureau also revokes the right of the PEO to be a co-employer with any/all client employers operating in Ohio.

Registration and securitization process
Any company operating or performing functions of a PEO in Ohio will register with BWC using the Professional Employer Organization Registration Application (UA-1) — used for both initial and renewal registration. Contact BWC's PEO unit at 614-466-6773 for a copy of the form.

  • A new PEO must complete the initial registration form within 30 days, submit it to BWC and pay the $100 initial registration fee. The fee will be billed directly to your policy.
  • PEOs already operating in Ohio must complete the initial registration form by Dec. 31, 2004, and pay the $100 initial registration fee. The fee will be billed directly to your policy. (Since the initial and renewal registration will occur simultaneously for the initial year of 2004, PEOs will only be required to submit one registration form for both initial registration (2004) and renewal registration (2005).
  • The renewal application, due by Dec. 31 of each year, is for certification for the upcoming year.
  • Complete the form in its entirety and list all active lease agreements as of the date of filing.
  • BWC will calculate the amount of securitization required from each PEO policy.
    • Securitization equates to the most recent 12 months (two most recently paid premiums periods) of premiums paid by the PEO.
    • If the PEO policy only has one premium period paid, the securitization amount will be calculated by multiplying the premium period by two.
    • If the PEO policy has not yet reported premiums to BWC, securitization will be based on the average of all Ohio PEO securitization amounts.
    • The securitization amount will be recalculated for each PEO policy prior to the annual renewal registration period (November-December).
    • The PEO may appeal the amount of securitization to BWC’s Adjudication Committee.
  • PEOs must identify the type of securitization provided to BWC for each PEO policy. BWC will calculate the amount of securitization required for each PEO policy per calendar year.
    • If a bond or letter of credit is provided as form of securitization, official documentation regarding the bond or letter of credit must accompany the UA-1.
    • If the PEO elects to use the online monthly premium payment option for securitization, the PEO must start reporting premiums monthly starting December 2004. Note: If the PEO policy fails to submit payroll and pay premiums timely using this option by the fifth of each month, BWC will immediately require the PEO policy to provide a bond or letter of credit, and the PEO may not be permitted to use the monthly payment option for the remainder of the policy year.
    • If the PEO obtains certification from an entity approved by BWC, official documentation regarding the certification, including securitization amount assigned to BWC as a beneficiary, must accompany the UA-1.
  • BWC will make available to the public the registration and certification status of each PEO policy on this Web site.
  • For PEOs currently granted the privilege of self-insurance by the administrator, you are not required to provide a form of securitization for the PEO registration and certification process. The securitization provided to BWC when granted the privilege of self-insurance will be used to meet the PEO securitization requirement.
    • If the self-insuring PEO loses its self-insurance privilege and/or decides to return to the state fund, the PEO must provide the appropriate form of securitization based on the state-fund policy.

Revocation of the PEO registration/certification
BWC may deny or revoke the registration of a PEO if the PEO fails to comply with the requirements pursuant to ORC 4125 or OAC 4123-17-15, specifically if the PEO is found to have:

  • Obtained or attempted to obtain registration through misrepresentation, misstatement of a material fact or fraud;
  • Misappropriated any funds of the client employer;
  • Used fraudulent or coercive practices to obtain or retain business or demonstrated financial irresponsibility;
  • Failed to appear, without reasonable cause or excuse, in response to a subpoena lawfully issued by the administrator.
The administrator and/or administrator’s designee, after reviewing the facts of the non-compliance issues in question, will make the final decision to revoke the registration and certification of the PEO. If the decision is to revoke the registration and certification, the PEO will receive a written notice within five days of determination. The PEO will have 30 days to file an appeal with BWC.

If the PEO does not file an appeal within 30 days of determination, BWC will:

  • Place the PEO policy in revoke status;
  • Terminate all existing lease agreements;
  • Notify the client employers of the PEO of the action taken by BWC.
If the PEO files an appeal within 30 days of determination, BWC will place the registration and certification status in deny-appealed. BWC will not terminate any PEO agreements or notify client employers until all appeals are exhausted.

PEO requirements

  • Notify all shared 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 notice to any client employer to whom that notice is relevant.
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.

PEO rate calculations and experience transfer process state-fund PEO to state-fund client employer
Guidelines for the notification of PEO/client information and for the transfer of experience modifications when an employer enters into or terminates a PEO agreement are found in BWC’s rule 4123-17-15.

The PEO must submit a UA-3, completed in its entirety, when establishing new PEO agreements, changing the type of existing PEO agreements and terminating PEO agreements. The type of PEO agreement determines the experience that is transferred to and from the PEO, whether the agreement is a full (entire client operations) or part (only a specific part by manual classification of the client operations), and if the payroll and claims of the client is reported under the PEO or under the client. Both the payroll and the associated claims losses must always be kept together under the chosen policy number to generate the correct amount of premium.

In the event the PEO chooses to report the client employers’ payroll or portion thereof, under the PEO policy number, BWC will transfer the appropriate experience period payroll and claims losses from the client employer to the PEO, effective the first day of the next payroll reporting period after which the contract was entered. If the agreement was entered on the first day of the period (Jan. 1 or July 1), the experience will be transferred effective on the actual date of the transfer. BWC will combine the payroll and the claims losses related to the new client with the PEO’s existing payroll and claim losses to calculate a new combined experience modification.

In the event the PEO chooses to report the client employers’ payroll and claims under the policy of the client, no transfer of experience will take place. When transferring a client employer from one policy to another policy within the same PEO, the lease agreement termination date and effective date of the new lease agreement must be continuous. The termination date and the start of the new lease agreement must be on consecutive days.
Example: A PEO employer has two policies, A and B. If the client is transferred from PEO A to PEO B effective Jan. 1, 2003, the lease agreement between PEO A and the client is terminated on Dec. 31, 2002. Using the same scenario, PEO A is not permitted to terminate a specific client effective Dec. 31, 2002, and transfer the client to PEO B effective Jan. 2, 2003.

PEOs must notify BWC in writing within 30 days of moving existing payroll associated with a specific client from the PEO’s policy number to the client’s or from the client’s policy number to the PEO’s. In these instances, BWC will make the appropriate transfer of payroll and claims losses.

Upon receiving a new lease agreement, if the UA-3 is received within 30 days of the effective date of the lease, BWC will process the lease using the effective date that is listed on the UA-3. If the UA-3 is received (date stamp or fax date) 30 days after the effective date of the lease, the lease should be processed using the receipt date of the UA-3 for the effective date.
Example: UA-3 received on Sept. 1, 2003, with an effective date of July 1, 2002. The lease will be made effective Sept. 1, 2003. In this case, since BWC only recognizes the lease agreement effective date as Sept. 1, 2003, the client employer will be responsible for reporting claims and payroll under the client policy for the July 1, 2002, through Aug. 31, 2003, period.

Below is a description of the types of lease agreements and the experience transferred to and from the PEO policy for rate-making purposes.

PEO agreement types
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 payroll 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 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.
  • 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 classifi cations, 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.

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.

  • The PEO must submit the UA-3 completed in its entirety.
  • The PEO must submit the Labor Lease Transaction – Payroll (AC-18) listing all payroll reported by payroll period and by manual classification under the PEO on behalf of the client employer during the agreement period.
  • The PEO must submit the Labor Lease Transaction – Claims (AC-19) listing claims reported under the PEO on behalf of the client employer during the agreement period.
  • BWC will recalculate the client employer’s premium rates using the experience data associated with its operation.
  • The client employer must report payroll and claims under the client employer policy starting the date immediately after the termination effective date.

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.

The premium rate calculated for the PEO policy follows the successorship rules pursuant to OAC 4123-17-02 and ORC 4125.04. 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.

Note:

  • BWC will not process (no transfer of experience) any PEO agreement initiated prior to July 1, 1997. However, in the event of the termination of these agreements, BWC will transfer back to the client employer’s policy the payroll and claims reported under the PEO on behalf of the client employer during the agreement period;
  • BWC will recalculate the PEO’s premium rate three times per year to include any adjustment to experience period claim and payroll calculations. BWC will recalculate the PEO’s policy in July, November and May of each calendar year.

To protect the integrity of the actuarial methodology, BWC will recognize any employer, whether he/she refers to himself/herself as a temporary agency, staffing company, management service organization, outsourcing organization, etc. which assumes the responsibility of handling human resource and workers’ compensation functions for a client employer and considers that labor force as employees of the agency/company/organization, as a PEO and will require the PEO to abide by the laws and rules governing the PEO industry.

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 payroll 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.

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.

Jurisdictional clarification
Under the following scenario, 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 scenario, 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.

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 ohiobwc.com 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 ohiobwc.com. BWC’s Information Technology Division will terminate any e-account that is not established by the actual employer.

PEO – managed care organization (MCO) requirements

  • PEO/Client relationship — All of the client employer’s work force is reported under the PEO’s policy number. The PEO’s MCO manages those claims, including experience claims of the client employer.
  • PEO/Client relationship — A portion of the client’s work force is reported under the PEO’s policy number.
    • The PEO’s MCO manages the claims reported to the PEO’s policy, including experience claims of the client employer associated with the portion involved in the PEO agreement.
    • The client maintains his/her MCO.
  • PEO/client relationship — All employees report under the client’s policy number. The client maintains his/her MCO.
  • PEO/client relationship — A portion of the client’s employees report under the client’s policy number:
    • The client maintains his/her MCO.
  • PEO/client relationship 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.

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.

PEO-client employer participating in individual-retrospective rating
Retro PEO, non-retro client
Upon initiation of the PEO agreement where the individual-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 individual-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 individual-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.

Non-individual-retro PEO, individual-retro client
Upon initiation of the PEO agreement where the PEO reports all or part of the individual-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 individual-retrospective-rated client will be responsible for all retrospective losses reported to his/her policy during the years of individual-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 individual-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.



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