PEO - peril or paradise? - opinions please

Pricehcs

All,

I am in the process or researching the merits of joining a PEO for potential benefits consolidation for cost savings. I would certainly value any opinions from this group as to the value or concerns you have with this arrangement. Thanks in advance.

#1 thing a consultant shouldn't say: "I could tell you the answer right now, but we're committed to a three month project..." #-o

mwild31

Hi pricehcs - it's basically outsourcing right? With the only difference in that there's some kind of an employment relationship that's created - a leasing arrangement of some sort...

ritaanz

Hey Price, what's a PEO? Sorry for my ignorance.

Pricehcs

Professional Employers Organization. The short version is that you 'join up' with a PEO to have your company be included in a larger population made up of multiple companies techinically working for the same organization, thus having leverage and economies of scale on benefits, payroll outsourcing, etc...

[url]http://www.adptotalsource.com/peo/peo.htm[/url]


#1 thing a consultant shouldn't say: "I could tell you the answer right now, but we're committed to a three month project..." #-o

ritaanz

Gotcha. Several companies join together and purchase i.e. medical insurance as a group. The idea being that this larger group had more leverage in getting cheaper rates. Right?

The one thing you need to know is that irregardless (hee...hee...) of the size of the group, you will still be rated by the group's experience rating. So, if one or two members of this group offer coverage to their retirees or happen to have large claims, the entire group will see that in their premiums.

System

That very thing happened to a group of local governments here in Maryland. Luckily, our city was not one of them The cities with very low experience ended up being billed for outrageous sums of money for the very high claims against two of the others.

Dutch2

We also saw the same happen in this area when several comunity colleges, small universities, etc. went together in an attempt to save costs. It looked really good when everyone first signed up, but sure 'nough, one or two or the schools had a few very serious and very costly illnesses and the others did not. You guessed it. The cost went up dramatically for everyone in the group, not just the schools that actually had the ee's that resulted in the higher costs. After just a few years, this group was dissolved and they are back to doing their own thing. ("It's your thing..... do what you wanna do...."
However, I'm sure that there are also a few positive stories out there as well.
Good Luck,

System

Pricehcs,
I work for a PEO and can tell you that the benefits of partnering with a PEO can be extremely advantageous. However, as with all other vendor relationships, it all depends upon who you select. When a PEO promises to provide you benefits, be extremely careful about which PEO you select. Most are very ethical and professional - however, there are some that give this industry a bad name. They prey upon unsuspecting companies, promising things they cannot deliver. Check them out! Contact your state department of insurance to see if the PEO is licensed to do business in your state. See if they meet the criteria as a "solvent" PEO - one who has the necessary capital and cash flow to satisfy the state standards of solvency. Are there any outstanding complaints or legal proceeding taken against them?
Make sure the policies they claim they have with their carriers (medical and workers comp)are truly with legitimate carriers and underwriters. If not and you have a catostrophic claim, it will be your responsibility to cover the claim if your PEO goes "belly up" or has non-existent covereage. If the PEO you select is a licensed, ethical and professional organization, you will be extremely pleased with what they can do for you and the amount of time and energy they will free up for you. You, in turn can then concentrate on helping your comapny generate revenue. Choose wisely, and you will find the arrangement extremely satisfying and econimically beneficial.

lnelson

We are also looking into a PEO. We are hesitant because we currently do in-house Payroll and would have to source that to the company offering the PEO. They in turn charge us a low rate on W/Comp but then include all taxes for PR. They make the checks, pay the taxes, do the W-2's.

There are questions I haven't gotten answers to yet like how does it affect a company with an enterprise zone and who has the liability should something happen pertaining to payroll/taxes.

Lisa

Don D

Irregardless?

ritaanz

Yep.

NancyJ

I would definately recommend it if the financials work for you. We have been with 2 PEOs in the past Vincam (now ADP TotalSource) and we are now with PBS, which is Paychex's PEO.

Our experience with Vincam was disastrous, and when we tried again and got a quote from ADP TotalSource the price was unbelievable.

Now, we are saving over $500,000 in healthcare costs per year, PLUS lower SUI costs and WC rates. We get top-notch support from our local PBS office and just went through our first no-hitch open enrollment.

We also have managed to maintain complete control - the employees don't know the difference (besides the cost for their portion of the benefits), and everything funnels through our HR department, including payroll.

I highly recommend it. Good luck!!