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Anyone have experience with a PEO exit strategy?
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Anyone have experience with a PEO exit strategy?
Discuss workforce management, performance management, retention, communication, motivation, contributing to business results and other topics.
Looking for experiences with exiting a PEO and moving towards independence. Your opinions? Pros? Cons? Things to know? Thanks.
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Forums » Topic Forums » General Forum » Anyone have experience with a PEO exit strategy?
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Anyone have experience with a PEO exit strategy?
posted at 3/12/2010 5:44 PM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
I pulled our company out of a PEO back in 2005. I spent the first little while budgeting the various costs of benefits vs what we had been paying the PEO...just to see where we stood. I was able to save about 20% a year, after adding in my salary.
But I also came from an HR background where I was well versed in researching.....You need to have a strong experienced HR person to carry out this project. And to carry the HR department forward. If you don't have that, pulling out of a PEO can be a huge liability increase. The biggest issues were Health insurance, the 401k assets and Workers compensation. The next was payroll...I strongly suggest doing the changeover at the beginning of a year. If that isn't possible then the beginning of a quarter could work, but not as well. It is possible that you will have to re-start your company with employees -- that is make sure you have an EIN, a state tax account, etc. Because while you were under the PEO, I suspect that they reported under their EIN/state tax number. Hopefully you have access (at least for a little while) to the forms that the PEO used. I also took a bit of time to download payroll records and databases as much as I could. I had to recreate many of the forms and changed them to make them more useful to our company. You can find a lot of examples of forms online. I started at the end of August and was out of the PEO by January 1st -- basically 4 months. During the same period of time, I converted two other payrolls from two other companies that we owned....from two different vendors. I moved all three to Quickbooks payroll. Another big thing that took a lot of lead time was pulling the assets out of the PEO's 401k plan and setting up one on our own. Definitely look to a TPA to help on this aspect. We used one that worked with American Funds and were very pleased. But the PEO wasn't real helpful on this -- they tended to not move as fast as others (and I have been on both sides of 401k conversions...they are never fast). Please let me know if you have questions. I found forums like this really help a lot to keep up with current issues (make sure you read the articles on the home page)....AHI Publications is another good one for current issues. Benefits Link is a good site for benefits issues. Payroll Talk is a good one for Payroll. Use the internet to increase your knowledge in areas where you might be weak. Also read plan documents for any plan that has one....read IRS Publication 15 and Publication 15B. Check to see what your state has online for employers -- especially wage laws, employer handbooks, etc. Research is a very good thing. |
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Anyone have experience with a PEO exit strategy?
posted at 3/15/2010 3:49 AM EDT
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Posts: 3
First: 3/12/2010 Last: 3/15/2010 |
rrupert, thank you SO much for the detail. I am curious as to the process you used to secure workers compensation, given the lack of available historic loss data that most carriers seem to require in order to avoid a "new business" rating. Was the higher new business rating simply an acceptable expense for your first year given the other overall savings? Same for medical loss data... Or is there a specific wording you used to require this data from your PEO? Thank you again! |
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Anyone have experience with a PEO exit strategy?
posted at 3/15/2010 4:30 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
We had gotten loss runs for WC previously. It wasn't too terribly hard to get that data or to get coverage because we had sustained very few claims.
As for health care, at the time, we managed to get insurance through the same provider as a small group...and our premiums were less than what the PEO was quoting for COBRA premiums. The PEO was self-insured and would provide no claims data to us...but each employee had to fill out the medical questionnaire that often happens when small groups change carriers. In TX, the one carrier that doesn't require it is BCBS -- they do the "gatekeeper" questionnaire. I didn't really look at the cost of each benefit separately, but rather the overall cost of pulling out. I had heard that WC and Health insurance would be the two hardest to come by with good premiums, but based on what the PEO was charging overall, we came out about $80K ahead annually after adding my salary to the internal cost. So financially it was a better move for the company. What's funny is that I ended up with one broker for WC -- since they had covered two other companies that were related....and a separate one for benefits. A few years later in 08, I ended up switching the benefits brokerage to the company who did our WC brokerage because they have such great customer service and just worked better with us. Do you have a relationship with any insurance brokers? If so, they should also be able to help you through this. I strongly suggest picking one that is 'like' your company or deals with companies your size/needs. We made the mistake of being a small fish in a large company those first two years. I admit I got sold by the bells and whistles only to turn around and get our service assigned to a brand new agent who knew much less than I did. When I went with an agency that dealt more with small groups, I became much happier! |
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Anyone have experience with a PEO exit strategy?
posted at 3/15/2010 4:40 AM EDT
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Posts: 3
First: 3/12/2010 Last: 3/15/2010 |
Thank you again! I'm in the process of interviewing brokers now, with the plan to use only one for everything. Looking forward to the final outcome. Really appreciate your input. |
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Anyone have experience with a PEO exit strategy?
posted at 3/15/2010 7:29 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
You are very welcome. I know it seems overwhelming at first, but once you have your processes/procedures/forms setup, it does get easier.
Oh one other thing I still outsource other than the TPA 401k admin is COBRA admin. With all the changes that Congress has made in the last 18 months or so, it has been worth it! The TPA does a great job of keeping up with all the documents/timing/payments, etc. |
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