worst PEOs

How to Exit The Worst PEOs?

Once you are in a PEO, there may be many reasons for dissatisfaction that may prompt you to exit. While you should be prepared with a checklist, you need to have a working broker who can guide you in the timing and proper replacement of benefits, payroll, and taxes.

The transitions are smooth if you prepare for it early and work with the knowledgeable insurance brokers. They can make an exit plan that will include worker’s compensation, payroll, and human resources. They can also create an employee manual and ensure the transition of the employees back to your company.

Are you terminating the relationship in the mid of the year? The PEO will have to complete the final taxes up to date and also provide the form W2’s for that period. The employees belonging to your company will be considered as new hires when you take them back. You should ensure that you have the Federal and State Tax ID numbers. When you are going to file W2s for the rest of the year, you are going to need those numbers. It means the employees will have two W2s from two employers.

When it comes to worker’s compensation, there can’t be any lapse in the coverage. It means that you will have to select the time of the transition carefully. The comp carriers may assume you to be newly started the firm as you may not be left with any comp under your name. It reduces the risk rating and also the ability to obtain coverage. It would be best if you can find an excellent agent to help you out during the transition.

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For the payroll, you will have to find a new payroll service provider. In this way, you can remain assured that the services are not interrupted. The new facility will need some time to become fully functional. During this period, you should co-ordinate with the benefits agent. It ensures that there are no coverage losses and deduction issues.

Once you have decided to exit your PEO, you will need to issue or reissue the employee handbook. You may have to coordinate the policy with that of the PEO such as leaves to keep the consistency.

On the front of employee benefits, you should find a good benefits broker and must work with him to find the best package of benefits for the company. The carriers may consider you a start-up company because you did not have any payroll and benefits under your name. It may affect the risk rating of the company and other considerations of underwriting.

If the PEO plan was fully or partially insured on own, you have issues in getting the claims that were incurred before the termination. You might have to pay the administration fee until all the claims are cleared.


When you have decided to exit the worst PEOs, you need to take care of the COBRA, 410(K) and leaves of absence or disabled too.

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