How Working with a CPEO Can Help Your Brokerage

Quick look: Certified PEO status is important for both PEOs and their client businesses, as it signifies compliance with rigorous standards set by the IRS. For brokers, working with a CPEO is equally as important. It ensures that the broker’s clients receive high-quality service, reliable solutions, and optimal outcomes—bolstering the broker’s professional standing and fostering long-term trust with their clients.

In the ever-evolving landscape of the health insurance industry, brokers face numerous challenges. From navigating complex regulations to managing administrative tasks, the demands on brokers are increasing. Luckily, many brokers are taking advantage of a powerful ally that can help them overcome these hurdles and unlock new avenues of success: a professional employer organization (PEO).

However, it is still common for brokers, HR professionals, and clients to not fully understand how to distinguish one PEO from another.

For many years, checking if a PEO held an accreditation from the Employer Services Assurance Corporation (ESAC) was one way to tell PEOs apart. But over the last few years, other industry standards have increased in importance, including Certified PEO (CPEO) status.

How does a PEO become certified?

The process to becoming certified isn’t easy. To obtain CPEO status in the United States, a PEO must meet specific requirements set by the IRS. The process involves an application and review process where the PEO must demonstrate compliance with various financial, operational, and tax-related criteria.

A few steps to becoming a certified PEO include:

• Meeting expectations set by IRS around tax status, background, experience, location, and annual financial audits
• Satisfying certain bonds 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 the PEO continues to meet all certification requirements

Once the certification status has been established, the CPEO must maintain specific records and provide the IRS with ongoing independent financial review reporting.

What makes a CPEO different from a non-certified PEO?

The most significant difference between a certified PEO and a non-certified PEO involves the 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 government can go after a client directly for taxes owed, even if the client has already remitted payroll taxes to their PEO, should the PEO fail to pay its client’s payroll taxes.

On the other hand, a CPEO is viewed as solely liable by the IRS for employment tax payments. As mandated in the Small Business Efficiency Act (SBEA) – which established the certified PEO program – the United States government and the IRS cannot go after a client to collect any unpaid payroll taxes. This liability falls completely on the CPEO (as long as the client has remitted the payroll taxes to the certified PEO).

Overall, CPEO status serves as mark of credibility, ensuring a higher level of professionalism and reliability.

Partnering with a CPEO helps brokers grow their book

Given the uncertainty and complexity surrounding healthcare in the United States today, many small businesses face numerous challenges with finding and offering affordable, quality healthcare (and other benefits) to their employees.

Often, these small employers look to their benefits and insurance brokers for guidance and assistance with finding the best alternatives and solutions to overcome their healthcare obstacles. This is where offering a certified PEO solution can provide numerous advantages for both brokers and their clients. Adding a PEO solution to their list of services can help brokers gain new clients and compete more effectively against national, direct-selling PEOs as well as larger brokerages.

Partnering with a CPEO also gives brokers peace of mind that they are providing their clients with added financial assurance. These credentials serve as a testament to the PEO’s expertise, reputation, and commitment to upholding industry standards. A broker’s credibility is intricately linked to the partners they choose, and by aligning with a PEO that possesses strong industry credentials, a broker can instill confidence in their clients—demonstrating that they’re partnering with a reputable organization with a proven track record.

Ensuring compliance with a trusted PEO partner

By obtaining industry certifications and credentials, a professional employer organization demonstrates its commitment to excellence in areas such as financial stability, operational integrity, and tax compliance. ExtensisHR is proud to be a Certified PEO and boasts all significant industry certifications, including:

• Employer Services Assurance Corporation (ESAC): showcases its financial stability and unwavering commitment to adhering to industry best practices.
• Certification Institute (CI) Accreditation: verifies the implementation of robust risk management protocols.
• SOC 1 Type 1 Certification: affirms the effectiveness and compliance of its internal controls and processes.

These credentials provide your clients with the confidence that they are partnering with a PEO that has undergone rigorous evaluations and meets the stringent requirements of the industry. With all credentials in place, ExtensisHR can offer enhanced services, increased credibility, and a greater level of protection to your clients—ensuing a mutually beneficial and successful partnership.

By partnering with a Certified PEO, you can provide your clients with comprehensive, compliant solutions that alleviate their burdens and empower them to focus on their core business. Contact one of our consultants today to learn more.

A version of this article originally appeared on the Benefits PRO Broker Innovation Lab blog. Click here to view the article.