How does a PEO become certified?

To be recognized by the IRS, a PEO must apply for the certification and provide extensive background information, including financials. In addition, once the certification status has been established, PEOs must maintain specific records and provide the IRS with ongoing independent financial review reporting.

Some of the steps to becoming a certified PEO include:

• Meeting IRS-set expectations around tax status, background, experience, location and annual financial audits

• Satisfying certain bond and financial review requirements

• Providing background reports of any individuals responsible for employment tax payments

• Agreeing to verify to the IRS. on a periodic basis that it continues to meet certification requirements

Being recognized as a CPEO means that the organization meets the strictest guidelines set by the United States government.

What makes a certified PEO different?

The most significant difference between a CPEO and a non-certified PEO has to do with financial assurance and peace of mind for clients and their brokers. When working with a non-certified PEO, the IRS views that both the PEO and the client are jointly liable for the payment of payroll taxes.

This means that the IRS can go after the client for taxes owed, even if that client has already remitted the payroll taxes to the PEO, should the PEO fail to pay its client’s payroll taxes.

A CPEO, however, is viewed by the IRS as solely liable for employment tax payments. As mandated in the Small Business Efficiency Act (SBEA) — which created the PEO certification program — the IRS cannot go after a client to collect any unpaid payroll taxes. This liability falls completely on the certified PEO (as long as the client has remitted the payroll taxes to the CPEO).

Certified PEOs help brokers grow their book and provide their clients financial assurance

With the complexity and uncertainty surrounding today’s health care market, and insurance premiums rising to record highs, small businesses are facing numerous challenges when it comes to health insurance and employee benefits.

For brokers looking to help their clients gain access to improved health care and benefit options, a PEO partnership could prove to be beneficial. These benefits don’t just apply to brokers, as PEOs help small businesses in a few critical areas.

While PEOs may be a new concept for some brokers and their clients, those who are interested in adding a PEO solution to their offerings can grow their book of business and differentiate from their competition. This is why understanding the importance of ESAC accreditation and CPEO designation is critical. They set PEOs apart in today’s market, and help instill confidence in clients that this solution is best for the future of their business.

Michael Altiero is the Digital Marketing Manager at Extensis Group, a regional Professional Employer Organization headquartered in the NYC area.