What Are the Different Types of PEO?

Choosing the right PEO for your business is a big decision. There are several different types of PEO, from full service to ESAC-recognized PEOs. Here are a few things to consider before choosing a PEO.

Full-service or full-service PEO

Generally speaking, a full service peo for small business is a company that is able to take over the administrative and liability responsibilities of your business. They are able to handle payroll and other HR functions, freeing you up to concentrate on the day-to-day operations of your business.

A PEO can help you maintain compliance with state and federal laws. You may be required to provide certain forms of information and sign off on policies. A PEO can help you stay on top of new laws and regulations. They can also provide excellent benefits to your employees, such as medical coverage.

PEOs can also help you manage workers’ compensation. They can also provide group health insurance and retirement plans. Their services can save you money on employee benefits and group health insurance.

PEOs have many benefits, but there are also some downsides to working with a PEO. Some PEOs can charge high fees for insurance premiums. Others will charge you a percentage of your payroll. They may also charge you for administrative fees. Some will also require you to pay for employees’ benefits.

The cost of a PEO will depend on the number of employees, the services they offer, and the company’s pricing model. Most PEOs stick to a basic pricing model. They will charge you a percentage of your payroll, or a flat fee for all employees.

If you want more in-depth services, you may pay a higher fee. Some PEOs also offer discounts for small businesses. You will also want to know how long your contract is for. PEOs usually have contracts for one year. You may also be required to give a 30 day notice to cancel your contract.

Bona fide PEO

Earlier this year, the Department of Labor (DOL) issued a final rule to facilitate the establishment and administration of multiple employer defined contribution plans. The rule expands the number of qualified multiple employer plans and makes it easier for PEOs to act as a single employer. Previously, the definition of “employer” in ERISA had been limited to “employers.” These rules change the definition of “employer” to include professional employer organizations (PEOs).

The regulation specifies four requirements for a bona fide PEO. The rules also provide two safe harbors: a certified PEO under Code Section 7705(a) and a PEO that meets 5 of the 9 criteria in the proposed regulations.

The Department of Labor has also released guidance on filing Form 5500 Annual Returns, lists of participating employers, and relief from reporting obligations. The rule includes some additional safe-harbors, such as for PEOs that provide employee benefits for the clients, which the PEO may not be directly required to do. The proposed rules include an exception to the “one bad apple” rule, which would allow PEOs to sponsor MEPs, even if one of their clients does not qualify as an employer.

The rule also addresses the complexities of multiple employer plans. PEOs may now sponsor and administer MEPs for their clients, although they must be “bona fide” PEOs. In addition, the rule changes the ERISA definition of “employer” so that PEOs are no longer defined as plan sponsors. The rule also includes some disclosure requirements, but these rules do not apply to MEPs sponsored by “bona fide” PEOs.

The rule also defines an open MEP. An open MEP is a defined contribution plan offered by a PEO that has a substantial employment function. In addition to providing employee benefits, the PEO is also responsible for administering the plan. The plan is offered only to current and former employees of the PEO.

Certified Professional Employer Organization (CPEO)

CPEO is a designation given by the IRS to a professional employer organization that demonstrates to the IRS that a PEO has met specific program requirements. The designation is of particular interest to companies that use PEOs.

Certified PEO clients are treated as successor employers for FICA and FUTA taxes. This means they do not have to restart their FICA and FUTA wage bases. They also continue to qualify for specified federal tax credits. This is a big win for small and mid-sized businesses that use PEOs.

The IRS has published a list of PEOs that meet program standards. The list updates every fifteenth day of the first month of a calendar quarter. This list can be found on the IRS’ website. It also contains the effective date of certification.

The IRS has set the bar pretty high for PEOs to earn the CPEO designation. In fact, only 5% of PEOs in the USA have received this honor. Those that do are known as Certified Professional Employer Organizations (CPEOs).

The certification process is voluntary. The IRS requires a PEO to abide by certain requirements and pay a fee of $1,000. The designation is also a symbol of professionalism. This helps industry outsiders understand the PEO’s capabilities.

The PEO must also pay quarterly employment taxes and provide proof of payment. This proof of payment must include an attestation from a certified public accountant. It also must include a surety bond. The bond amount is calculated at 5% of the PEO’s federal tax liabilities.

In order to qualify for certification, the PEO must demonstrate to the IRS that it complies with federal law. In addition, the PEO must provide ongoing independent financial review reporting to the IRS.

ESAC-recognized PEOs

ESAC-recognized PEOs are held to the highest standards in the PEO industry. They provide ethical services to small businesses nationwide. They offer an additional assurance to taxing authorities and insurers. They also save time and money on compliance and compliance costs.

PEOs that are ESAC accredited are certified businesses that have passed audited procedures by an independent CPA. They are also audited regularly for compliance with operational and state regulations. The standards are set by a broad-based Industry Advisory Council. They are regularly updated by the ESAC Board of Directors.

ESAC-recognized PEOs are considered the gold standard in financial reliability. The assurance is provided to clients, taxing authorities, insurers, and state and federal regulators. ESAC-recognized PEOs have no defaults.

ESAC-recognized PEOs provide an unparalleled level of assurance to worksite employees, taxing authorities, insurers, and other clients. Their assurance program is similar to the assurances provided by the FDIC for the banking industry. The program reimburses worksite employees, insurers, and taxing authorities in the event of a default.

PEOs that are ESAC accredited are also required to hold a $1 million bond. This bond protects the payment of premiums and wages for employees. It also protects the insurer in the event of a default.

The ESAC program is governed by a Board of Directors, which is made up of former regulators, PEO industry attorneys, and certified public accountants. These experts have more than 100 years of combined PEO industry experience. They review the business’s compliance with federal and state regulations, as well as the PEO’s operational standards. ESAC has been reviewing PEOs since 1995.

ESAC is a non-profit, independent nonprofit corporation. It provides financial assurance to businesses through its PEO Client Assurance Program.

Engage PEO

Whether you’re looking for a full-service PEO or a PEO that only offers HR services, Engage PEO has an array of HR solutions that can help you grow your business. Engage is a national company with a team of certified HR experts that offer turnkey solutions for small businesses.

Engage PEO has a full suite of HR services including payroll, benefits, compliance, and risk management. Its cloud-based technology platform is designed to help small businesses streamline critical processes. It provides an integrated self-service portal that allows users to easily manage their benefits, employees, and payroll. It’s easy to access on a desktop or mobile device, and it includes training resources on topics like employee engagement, interviewing, and workplace harassment.

Engage has received certifications from the Employer Services Assurance Corporation (ESAC) and the Society for Human Resource Management. It is also certified by the IRS as a Certified Professional Employer Organization (CPEO). Engage was also named to Inc. magazine’s list of the 5000 fastest growing private companies since 2016.

Engage offers a variety of benefits to its employees, including dental and vision plans, major medical insurance, a world-class 401(k) program, and employee assistance programs. These benefits are affordable for all businesses, and provide employees with tools to manage their health.

Engage’s PEO services also include compliance audits, employee training, and risk management services. They have a unique approach to HR delivery that combines the skills of experienced HR professionals with technology expertise.


Engage also has a comprehensive suite of ACA-compliant benefits. They include medical insurance, workers’ compensation, and long-term disability coverage. They also offer voluntary benefits that are offered to employees at no cost. They also offer a suite of business solutions to help small businesses free up their time and resources for other business tasks.