Policy
Name:
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Alternate
Employer Organizations (AEOs) and Professional Employer Organizations (PEOs)
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Policy #:
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EP-16-04
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Code/Rule
Reference
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ORC
Chapters 4125 and 4133; ORC 4123.15; OAC 4123-17-14, 4123-17-15, 4123-17-15.1, 4123-17-15.2, 4123-17-15.4, 4123-17-15.6, 4123-17-15.7, and 4123-17-16.
|
Effective
Date:
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July 1, 2023
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Approved:
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Rex
Blateri, Chief of Employer Services
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Origin:
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Employer
Policy
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Supersedes:
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Alternate
Employer Organizations (AEOs) and Professional Employer Organizations (PEOs)
Policy effective July 1, 2021.
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History:
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Revised June
14, 2023; October 18, 2021; March 5, 2019; March 12, 2008. New policy, July
2007.
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Review
Date:
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July 1, 2028
|
I. Policy Purpose
The
Ohio Bureau of Workers’ Compensation (BWC) is responsible for administering and
enforcing ORC Chapter 4125 Professional Employer Organizations
(PEOs) and ORC Chapter 4133 Alternate Employer Organizations (AEOs).
II. Applicability
This
policy applies to: state fund AEOs, state fund PEOs, and their authorized
representatives; PEO reporting entities and their authorized representatives;
client employers of AEOs, PEOs and their authorized representatives; assurance
organizations; and the BWC PEO/AEO Unit.
III. Definitions
A.
Alternate
Employer Organization (AEO):
A sole proprietor, partnership, association, limited liability company, or
corporation that enters into an agreement with one or more client employers for
purposes of providing human resource management services and sharing employer
responsibility and liability. An AEO does not include a temporary service
agency.
B.
Professional
Employer Organization (PEO):
A sole proprietor, partnership, association, limited liability company, or
corporation that enters into an agreement with one or more client employers for
the purpose of co-employing all or part of the client employer’s workforce at
the client employer’s work site. PEO does not include a temporary service
agency.
C.
AEO agreement: A written contract between a client
employer and an AEO to provide human resource management services and to share
employer responsibilities and liabilities. Upon entering into an AEO agreement,
a client employer’s worksite employees are covered under the AEO’s workers’
compensation policy.
D.
Client employer: A sole proprietor, partnership,
association, limited liability company, or corporation that enters into an AEO
agreement and shares employer responsibility and liability with the AEO, or
that enters into a PEO agreement and is assigned shared employees by the PEO.
“Client employer” does not mean a non-complying employer as defined in OAC
4123-14-01.
E.
Co-employ: The sharing of the responsibilities and
liabilities of being an employer.
F.
Employer Services
Assurance Corporation (ESAC):
An independent nonprofit corporation that is an accreditation and financial
assurance organization for the PEO industry.
G.
PEO agreement: A written contract to co-employ
employees between a PEO and a client employer with a duration not less than
twelve (12) months in accordance with the requirements of ORC Chapter 4125.
H.
PEO reporting
entity: Two or more
PEOs that are majority owned or commonly controlled by the same entity, parent,
or controlling person and satisfy reporting entity control rules as defined by
the financial accounting standards board and under Generally Accepted
Accounting Principles (GAAP).
I.
Shared employee: An individual intended to be assigned
to a client employer on a permanent basis, not as a temporary supplement to the
client employer’s workforce, who is co-employed by a PEO and a client employer
pursuant to a PEO agreement.
J.
Working capital: The excess of current assets over
current liabilities as determined by GAAP.
K.
Worksite employee: An individual assigned to a client
employer on a permanent basis, not as a temporary supplement to the client
employer’s workforce, who is employed by both an AEO and a client employer
pursuant to an AEO agreement.
IV. Policy
A.
Overview:
1.
AEOs provide human
resource management services. The AEO relationship involves a sharing of
employer responsibility and liability, between the AEO and the client employer,
under an AEO agreement.
2.
AEOs must not be
considered PEOs. Beginning January 1, 2022, an AEO may not hold itself out,
advertise, or otherwise identify itself in any way as a PEO.
3.
PEOs are
co-employers. The PEO relationship involves a contractual allocation, and
sharing of employer responsibilities, between the PEO and the client employer
under a PEO agreement.
4.
BWC is responsible
for enforcing ORC Chapter 4125 Professional Employer Organizations and ORC
Chapter 4133 Alternate Employer Organizations.
5.
Where an AEO or a
PEO is required to give notice, register, or make a report to BWC, the AEO or the
PEO must use forms required by BWC. The AEO or the PEO must complete the forms
in full, as determined by BWC, for such notice, registration, or report to be
effective.
6.
BWC does not use
this policy to address AEO or PEO participation in employer programs. See the
specific employer program policy for information about AEO or PEO participation.
B.
Registration and
reporting requirements.
1.
AEOs and PEOs:
a.
An AEO or a PEO
operating in Ohio must apply for coverage with BWC and obtain a BWC policy
number.
i.
The PEO must
register with BWC by submitting the Professional Employer Organization
Registration Application (UA-1) no later than thirty (30) days after the formation
of the PEO. The PEO must submit an initial registration fee of $1,000 with its
registration.
ii.
The AEO must
register with BWC by submitting the Alternate Employer Organization
Registration Application (UA-2) no later than thirty (30) days after the
formation of the AEO. The AEO must submit an initial registration fee of $1,000
with its registration.
b.
The AEO or PEO must
submit the following information when initially registering and when annually
renewing registration with BWC:
i.
A list of the AEO’s
or the PEO’s client employers current as of the date of the initial or renewal
registration. The list must include the employer’s name, address, federal
identification number, and BWC policy number;
ii.
The name(s) under
which the AEO or the PEO conducts business;
iii. The addresses of the AEO’s or the PEO’s
principal place of business and each office maintained in Ohio;
iv.
The AEO’s or the PEO’s
taxpayer or employer identification number;
v.
A list of each state
in which the AEO or the PEO has operated in the preceding five years, and the
name, corresponding with each state, under which the AEO or the PEO operated,
including any alternative names, predecessor names, and if known, successors,
and whether the entity is an AEO or a PEO in the other state(s);
vi.
A list of all
corporate officers;
vii. A list of all related corporate entities;
viii. An attestation of the accuracy of the data submissions from
the chief executive officer (CEO), president, or other individual who serves as
the controlling person of the AEO or the PEO;
ix.
Security as required
under ORC 4123.05 and ORC 4133.07; and
x.
The most recent
financial statement prepared and audited in accordance with OAC 4123-17-15.4. For initial registration, such
financial statement must be no older than thirteen (13) months at the time it
is submitted to BWC. For renewal registration, the financial statement must be
submitted within one hundred eighty (180) days of the close of the AEO’s or the
PEO’s fiscal year.
c.
The AEO must submit
a letter of credit assignable to BWC in an amount necessary to meet the
financial obligations of the AEO. BWC will determine the amount of the letter
of credit, which will be at least $1 million.
2.
PEO reporting
entities:
a.
Commonly owned or
controlled PEOs may register as a PEO reporting entity or register individually.
b.
A PEO reporting
entity completing the financial reporting mandates for commonly owned or
controlled PEOs must submit an initial registration fee of $1,000 for each full
registration PEO within the PEO reporting entity. The PEO reporting entity must
submit the following information when registering and renewing registration
with BWC:
i.
A list of each of
the PEOs for which the PEO reporting entity will complete financial reporting mandates;
ii.
The name(s) under
which the PEO reporting entity conducts business;
iii. The address of the PEO reporting
entity’s principal place of business and the address of each office the PEO
reporting entity maintains in Ohio;
iv.
The PEO reporting
entity’s taxpayer or employer identification number;
v.
A list of all
corporate officers of the PEO reporting entity;
vi.
The most recent
financial statement prepared and audited in accordance with OAC 4123-17-15.4.
The financial statement must be no older than thirteen (13) months at the time
it is submitted to BWC;
vii. Security as required under ORC 4125.05;
and
viii. An attestation of the accuracy of the data submissions from
the CEO, president, or other individual who serves as the controlling person of
the PEO reporting entity.
3.
BWC may grant
limited registration to an AEO or a PEO for reasons specified by BWC in the
certificate of limited registration.
a.
The AEO or the PEO
must provide all of the following to BWC:
i.
A properly executed Professional
Employer Organization Limited Registration Application (UA-1 L) or Alternate Employer Organization Limited Registration
Application (UA-2L);
ii.
A fee of $250;
iii. All information required for
registration set forth in sections IV.B.1.b.i through IV.B.1.b.x above; and
iv.
Information and
documentation necessary to show the AEO or the PEO satisfies all of the
following criteria:
a)
The AEO or the PEO
is domiciled outside of Ohio and does not maintain an office in Ohio;
b)
The AEO or the PEO
is licensed or registered as an AEO or a PEO in another state;
c)
The AEO or the PEO
does not participate in direct solicitations for client employers located or
domiciled in Ohio; and
d)
The AEO or the PEO
has fifty (50) or fewer worksite employees or shared employees employed or
domiciled on any given day. For purposes of this paragraph, an AEO or a PEO is
not domiciled outside of Ohio if a commonly owned or otherwise related
corporate entity is domiciled or maintains an office in Ohio.
b.
BWC may require
security of the limited registration AEO or the limited registration PEO
pursuant to ORC 4125.05, ORC 4133.07, and OAC 4123-17-15.2.
c.
All limited
registration PEO client employers must report all payroll and claims under the
client employer policy for BWC purposes.
4.
Following the
initial registration, each PEO and PEO reporting entity must renew its
registration and pay the annual renewal fee no later than December 31 of each
year. The annual renewal fee must be submitted as follows:
a.
For each full
registration PEO, $250.
b.
For each PEO
reporting entity, $250 for each PEO within the PEO reporting entity.
c.
For each limited
registration PEO, $100.
5.
Following the
initial registration, each AEO must renew its registration and pay the annual
renewal fee no later than December 31 of each year. The annual renewal fee is
$250 for each AEO. The annual renewal fee is $100 for each limited registration
AEO.
6.
The AEO or the PEO
must provide BWC with an annual report of its client employers and total
workforce, by employee, no later than the date determined by BWC.
a.
The report must list
all individual employees by client employer; and
b.
For each employee
provide identification information, quarterly payroll, associated
classification code, title or position, and department.
7.
BWC maintains a list
of registered AEOs, PEOs, and PEO reporting entities that is readily available
to the public.
8.
The following acts
are prohibited:
a.
Beginning on and
after January 1, 2022, an AEO that is currently registered in Ohio owning,
co-owning, or commonly controlling an AEO, a PEO, or PEO reporting entity that
is registered in Ohio; and
b.
Beginning on and
after January 1, 2022, a PEO or a PEO reporting entity, that is currently
registered in Ohio owning, co-owning, or commonly controlling an AEO that is
registered in Ohio.
9.
Except as necessary
for BWC and its employees to perform their official duties, all records,
reports, client lists, and other information obtained from an AEO, a PEO, or a
PEO reporting entity are confidential. These records, reports, client lists and
other information will be considered trade secrets and will not be published or
open to public inspection.
C.
Financial mandates.
1.
The AEO or the PEO
must prepare financial statements in accordance with GAAP and submit them
electronically to BWC for registration and registration renewal. For initial
registration, such financial statements must be no older than thirteen (13)
months at the time of submission to BWC. For renewal registration, the
financial statements must be submitted within one hundred eighty (180) days of
the close of the AEO’s or the PEO’s fiscal year.
a.
The financial
statements must be audited by an independent certified public accountant (CPA).
i.
The resulting report
of the auditor must not include either of the following:
a)
A qualification or
disclaimer of opinion as to adherence to GAAP; or
b)
A statement
expressing substantial doubt about the ability of the AEO, the PEO, or the PEO reporting
entity to continue as a going concern.
ii.
If an AEO or a PEO
does not have at least twelve (12) months of operating history on which to base
financial statements:
a)
The AEO must provide
a letter of credit in an amount not less than $1 million as determined by BWC
or the PEO must provide a bond or letter of credit in an amount not less than
$100,000 as determined by BWC; and
b)
The AEO or the PEO
must provide CPA reviewed financial statements until such time the AEO or the PEO
can provide GAAP financials within one hundred eighty (180) days of the end of
the AEO’s or the PEO’s initial fiscal year. The AEO or the PEO must apply to
BWC in writing for an extension of this deadline. The AEO’s or the PEO’s CPA
must explain the reasons for the delay.
b.
A PEO reporting
entity may submit a combined or consolidated financial statement. If the
combined or consolidated financial statement includes entities that are not
PEOs, or are not in the PEO reporting entity, the controlling entity of the PEO
reporting entity submitting the financial statement must guarantee the PEOs
have satisfied the working capital requirements.
c.
If an AEO is a
subsidiary, or is related to a variable interest entity, the AEO or AEO entity
may submit the AEO’s required financial statements.
2.
An AEO, a PEO, or a PEO
reporting entity must maintain positive working capital at initial or renewal
registration as reflected in the financial statements submitted to BWC. If a
deficit in working capital is reflected in the financial statements submitted
to BWC:
a.
The AEO, the PEO, or
the PEO reporting entity must submit a quarterly financial statement to BWC for
each calendar quarter during which there is a deficit of working capital,
accompanied by an attestation of the CEO, president, or other individual who
serves as the controlling person of the AEO, the PEO, or the PEO reporting
entity that all wages, taxes, workers’ compensation premiums, and employee
benefits have been paid by the AEO, the PEO, or members of the PEO reporting
entity.
b.
The PEO or the PEO
reporting entity must obtain a bond, irrevocable letter of credit, or
securities with minimum market value sufficient to cover the deficit in working
capital. Such security must be held by a depository designated by BWC. The
security will be used by BWC to secure payment by the PEO or PEO reporting
entity of all taxes, benefits, or other entitlements due or otherwise
pertaining to shared employees, if the PEO or PEO reporting entity does not
make those payments when due.
c.
The AEO will provide
a letter of credit in favor of BWC at the time of registration which will
secure payment by the AEO of all taxes, benefits, or other entitlements due or
otherwise pertaining to worksite employees, if the AEO does not make those
payments when due.
3.
The BWC PEO/AEO Unit
will inform the Employer Services Assurance Corporation (ESAC) when a member
PEO has a deficit in working capital. ESAC will review the case and provide BWC
its opinion, in writing, of the PEO’s financial solvency.
a.
If ESAC provides a
positive endorsement of the PEO’s solvency, ESAC will provide the security for
the PEO.
b.
If ESAC does not
endorse the PEO’s solvency, BWC will require the PEO to provide security in the
form of a surety bond or letter of credit in the amount of the deficit.
c.
BWC may revoke the
PEO’s registration if the PEO fails to provide security for the deficit in
working capital.
4.
BWC will deny an
AEO’s initial or renewal application if the AEO fails to meet all the requirements
in policy sections IV.C.1 and IV.C.2.
D.
AEO agreements and PEO
agreements.
1.
There are three
types of PEO agreements based on the reporting of payroll and claims:
a.
All payroll and
claims reported under the PEO policy.
b.
All payroll and
claims reported under the client policy.
c.
A portion of payroll
and claims reported under the PEO policy. (See Part Leases section below)
2.
Under an AEO
agreement, all payroll and claims must be reported under the AEO policy.
3.
The AEO or the PEO
must notify BWC within thirty (30) days of entering into an AEO agreement or
PEO agreement, or when changing the type of PEO agreement. The AEO, or the PEO for
payroll reported under the PEO’s policy, must list payroll within the existing
classification codes of the client employer.
a.
A PEO must submit
the Professional Employer Organization Client Relationship Notification
(UA-3) form.
b.
An AEO must submit
the Alternate Employer Organization Client Relationship Notification (UA-4) form.
4.
If BWC is not
notified within thirty (30) days of the AEO agreement or the PEO agreement:
a.
The AEO agreement or
the PEO agreement will be recognized on the date BWC receives the notice; and
b.
The client employer
will be responsible for reporting payroll and claims under its policy until the
recognized effective date of the agreement.
5.
Where a client
employer enters into an AEO agreement or a PEO agreement:
a.
The client employer
must establish and maintain coverage with BWC.
b.
The AEO or the PEO
will be considered the succeeding employer, solely for purposes of workers’
compensation experience, and will be subject to OAC 4123-17-02.
c.
When the AEO agreement
or the PEO agreement is terminated, the AEO or the PEO declares bankruptcy, or
the AEO or the PEO ceases operation in Ohio, the AEO or the PEO must notify BWC
and each client employer within thirty (30) days from the effective date of
termination. The AEO or the PEO must identify the portion of the PEO’s
experience to be transferred to each client employer by submitting forms Labor
Lease Transaction – Payroll (AC-18) and Labor Lease Transaction – Claims (AC-19) to BWC.
6.
An AEO agreement or
a PEO agreement, or a change in an AEO agreement or a PEO agreement, filed with
BWC will have the following effective date for workers’ compensation premium
and claims purposes:
a.
If the commencement
date of the AEO agreement or the PEO agreement or change in the AEO agreement
or the PEO agreement is January 1 or July 1, the commencement date; or
b.
If the commencement
date of the AEO agreement or the PEO agreement or change in the AEO agreement
or the PEO agreement is not January 1 or July 1, the next January 1 or July 1,
whichever is earlier.
7.
If the PEO submits a
PEO reporting or part PEO agreement, with an effective date in the middle of
the payroll period, BWC will require the PEO to resubmit a new or modified PEO
agreement, signed by the client employer, acknowledging all under client PEO
agreement.
8.
For payroll reported
under the PEO’s policy, the PEO must report payroll within the existing
classification codes of the client employer.
9.
An AEO or a PEO who
enters into an AEO agreement or a PEO agreement with a non-complying employer,
or an AEO or a PEO who fails to comply with OAC 4123-17-15 through
4123-17-15.7, will not be considered the employer for workers’ compensation
purposes. In these circumstances:
a.
The payroll and
claims of worksite employees or shared employees must be reported under the
client employer’s workers’ compensation policy number, unless prohibited by
federal law; and
b.
Claims filed by worksite
employees or shared employees must be charged to the experience of the client
employer.
c.
This policy does not
include instances where an AEO or a PEO enters into an AEO agreement or a PEO
agreement with a client who has never established a BWC policy. In these
instances, all claims and payroll experience will remain with the AEO or the PEO
for the period previous to the client establishing a BWC policy number.
10.
BWC will not
recognize an AEO agreement or a PEO agreement when the employees of an
out-of-state client employer do not have sufficient contacts with Ohio to meet
the jurisdictional requirements for coverage.
11.
An AEO or a PEO is
prohibited from entering into any AEO agreement or PEO agreement where the
client employer is an AEO or a PEO, and BWC will not recognize any AEO
agreement or PEO agreement where the client employer is an AEO or a PEO.
12.
An AEO is prohibited
from entering into a PEO agreement with a client employer and a PEO is
prohibited from entering into an AEO agreement with a client employer.
13.
BWC will assess a
$50 late processing fee for each occurrence of an AEO or a PEO failing to:
a.
Notify BWC within
thirty (30) days when entering into, or changing, an AEO agreement or a PEO
agreement;
b.
Notify BWC or a
client employer within thirty (30) days of termination of an AEO agreement or a
PEO agreement;
c.
Notify BWC or a
client employer within thirty (30) days of declaring bankruptcy; or
d.
Notify BWC or a
client employer within thirty (30) days of ceasing operations in Ohio.
E.
Part leases.
1.
A PEO may enter into
a PEO agreement to co-employ part of a client employer’s workforce, provided
the client employer is not a temporary agency, only to the extent the PEO pays
and reports wages under its tax identification number for federal tax purposes.
2.
Under a part lease
agreement payroll must be reported to BWC as follows:
a.
The PEO must report
under its BWC policy number payroll paid and reported for federal tax purposes
under the PEO’s tax identification number.
b.
The client employer
must report under its BWC policy number payroll associated with wages not paid
and reported under the PEO’s tax identification number.
3.
All of a client
employer’s payroll within a classification code must be reported to BWC in its
entirety under either the BWC policy number of the PEO or the client employer.
Such payroll may not be split between the PEO and the client employer.
F.
Client employer
estimated annual premium (EAP) and installments.
1.
All payroll is
reported under the client employer’s policy:
a.
The client employer
will receive the notice of EAP prior to the beginning of the policy year.
b.
The client employer
will follow the installment schedule established at the beginning of the policy
year.
2.
All payroll is
reported under the AEO or the PEO policy:
a.
New AEO agreement or
new PEO agreement: BWC will stop the client employer’s installments as of the
effective date of the AEO agreement or the PEO agreement. BWC will recalculate
the client employer’s EAP to zero.
b.
AEO agreement
termination or PEO agreement termination: BWC will begin client employer
installments as of the effective date of AEO agreement termination or PEO
agreement termination. BWC will recalculate the client employer’s EAP for the
remaining policy year upon request.
3.
A part lease PEO
agreement: The payroll is reported under the PEO policy. New part lease PEO
agreement: The client employer’s installment schedule remains in place until
BWC recalculates the client employer’s EAP to account for the remaining
classification codes reported under the client’s policy.
G.
Religious exemption
guidelines.
1.
BWC will recognize a
religious exemption for an AEO or a PEO and all worksite employees or all shared
employees who meet the requirements of ORC 4123.15 as clarified below.
2.
In order for the
religious exemption to be applicable to an AEO agreement or a PEO agreement,
the exemption must first be established between the client employer and the
employee. The client employer and employee must be members of the same
religious sect.
3.
As of the effective
date of the exemption, the AEO or the PEO is no longer required to report
payroll and pay premium and assessments on the worksite employee or shared
employee covered by the exemption.
4.
The exemption is
valid for all future years unless BWC determines the client employer, the individual
worksite employee or the individual shared employee, or the religious sect
ceases to meet the requirements for the religious exemption.
5.
BWC AEO requirements
or PEO requirements are not affected by any AEO or PEO federal reporting
requirements relating to the religious exemption.
H.
Transfers of
experience, including unique claim circumstances related to Retrospective
Rating, Deductible Program, and Group Retrospective Rating Program
participation.
1.
There is no transfer
of experience when the client employer is a public employer taxing district
(PEC employer).
2.
Pursuant to a PEO
agreement, BWC will transfer the appropriate experience period payroll and
claims from the client employer to the PEO to calculate the PEO’s experience
modification (EM) when the PEO elects to report all, or a portion, of the
payroll and claims under its policy.
3.
Pursuant to an AEO
agreement, BWC will transfer the appropriate experience period payroll and
claims from the client employer to the AEO to calculate the AEO’s EM.
4.
A client employer
entering into an AEO agreement or a PEO agreement will not transfer program
participation liabilities from the client employer to the AEO or the PEO.
5.
Claims that occur
prior to the AEO agreement or the PEO agreement will continue to be included in
the client employer’s program participation for:
a.
Retrospective Rating.
The claims will be used in the client employer’s annual Retrospective Rating
premium adjustment.
b.
Deductible Program.
The client employer will continue to be billed for Deductible Program claim
costs.
c.
Group Retrospective
Rating Program. The claims will be used in the client employer’s Group
Retrospective Rating premium calculation.
6.
Claims that occur
prior to the AEO agreement or the PEO agreement will not be included in the
AEO’s program participation or the PEO’s program participation for:
a.
Retrospective
Rating;
b.
Deductible Program;
and
c.
Group Retrospective
Rating Program.
7.
The termination of
an AEO agreement or the termination of a PEO agreement will not transfer
program participation liabilities from the AEO or the PEO to the client
employer.
8.
Claims that occur
during the AEO agreement or the PEO agreement will continue to be included in
the AEO’s program participation or the PEO’s program participation for:
a.
Retrospective Rating.
The claims will be used in the AEO’s annual Retrospective Rating premium
adjustment or PEO’s annual Retrospective Rating premium adjustment.
b.
Deductible Program.
The AEO or the PEO will continue to be billed for Deductible Program claim
costs.
c.
Group Retrospective
Rating Program. The claims will be used in the AEO’s Group Retrospective Rating
premium calculation or the PEO’s Group Retrospective Rating premium calculation.
9.
Claims that occur
during the AEO agreement or the PEO agreement will not be included in the
client employer’s program participation for:
a.
Retrospective
Rating;
b.
Deductible Program;
and
c.
Group Retrospective
Rating Program.
10.
An AEO’s EM or a PEO’s
EM is recalculated two times per year or upon request with due cause and BWC
PEO/AEO Unit approval.
I.
AEO and PEO obligations.
1.
An AEO or a PEO must
perform all of the following functions:
a.
Maintain payroll and
claims records for each of the AEO’s or the PEO’s client employers for each
payroll reporting period.
i.
Payroll records must
clearly identify the appropriate classification codes assigned to each client
employer, the payroll reported in each classification code, and the premiums
paid for each client employer for each payroll period covered by the AEO
agreement or the PEO agreement.
ii.
Claims records must
be separately identified according to the client employer.
b.
Report individual
client employer payroll, claims, and classification code data under a separate
and unique subaccount with BWC.
c.
Maintain workers’
compensation coverage, pay all workers’ compensation premiums, and manage all workers’
compensation claims, filings, and related procedures associated with worksite
employees or shared employees. When worksite employees or shared employees are
ministers or elective coverage persons as defined in OAC 4123-17-07, the AEO’s payroll report or the PEO’s
payroll report must include the entire amount of payroll associated with these
persons and will not be subject to the weekly minimum and maximum provided in
OAC 4123-17-30.
d.
When an AEO or a PEO
is reporting client employer payroll for a sole proprietor or a partner
pursuant to an AEO agreement or a PEO agreement, the AEO or the PEO is to use
the following guidelines for reporting the sole proprietor’s or partner’s
earnings:
i.
The full earnings of
sole proprietors and partners of client employers under an AEO agreement or a
PEO agreement are reportable.
ii.
For a sole
proprietor, the AEO or the PEO reports the Net Profit from the federal Form
1040 Schedule C. Losses are not deductible.
iii. For a partner, the AEO or the PEO reports
the Ordinary Income from the federal Form 1065 Schedule K-1, plus any
Guaranteed Payments to Partners, less Section 179 depreciation. Losses are not
deductible.
iv.
The AEO or the PEO
uses the business’ year-end tax return that falls in the policy year for
reporting. If the tax return is not completed, the AEO or the PEO estimates the
net income and adjusts the monthly reporting once the tax return has been
filed.
v.
Sole proprietors and
partners reporting no earnings are not considered employees and as such, are
not covered in the event of a workplace injury. Individuals performing unpaid
services for a client employer, including a non-profit, are not covered under
workers’ compensation.
vi.
Under an AEO
agreement or a PEO agreement where the client employer files its business taxes
as a sole proprietorship, a partnership, or an individual incorporated as a
corporation (ICORP), the owners are not considered employees of the sole
proprietorship, partnership, or ICORP and for them, coverage is elective.
e.
Within fourteen (14)
days of receiving notice from BWC that a dividend, refund, or rebate will be
applied to workers’ compensation premium, the AEO or the PEO must provide a
copy of such notice to any client employer to whom the notice is relevant.
f.
Within thirty (30)
days after receiving a dividend, refund, or rebate that is applied to workers’
compensation premiums, either fully redistribute or fully credit the client
employer to whom that dividend, refund, or rebate is relevant.
2.
An AEO must perform
all of the following functions:
a.
Annually provide
written notice to each worksite employee of the relationship between, and the
responsibilities of, the AEO and the client employer.
b.
An AEO must process
and pay all wages and applicable state and federal payroll taxes associated
with worksite employees under the client employer’s federal tax identification
number, either directly by the AEO or through a third party vendor contracted
by the AEO that is not a client employer, irrespective of payments made by the
client employer, as established in the terms and conditions of compensation in
the AEO agreement.
c.
An AEO must pay all
related payroll taxes associated with a worksite employee under the federal tax
identification number of the client employer, independent of the terms and
conditions contained in the AEO agreement.
d.
An AEO must annually
certify to BWC that all client employer federal payroll taxes have been timely
and appropriately paid, and upon BWC request, the AEO must provide proof of
payment.
e.
List the client
employer on the W-2 of all worksite employees, but the AEO remains jointly and
severally liable for all applicable local, state, and federal withholding and
employer-paid taxes with respect to the worksite employees.
f.
File federal taxes
entirely under the client employer’s tax identification number but remain
jointly and severally liable for all wages and payroll taxes associated with
worksite employees.
g.
If a client employer
fails to transmit sufficient payment to the AEO to cover payment of all wages
and employer-paid taxes, the AEO must keep a record of the nonpayment or underpayment
and record that the AEO nonetheless paid the wages and taxes owed.
h.
Not provide partial
or split workers’ compensation coverage for worksite employees in which the
client employer provides that coverage for some, but not all, of the client
employer’s worksite employees.
3.
A PEO must perform
all of the following functions:
a.
Provide written
notice to each shared employee of the relationship between, and the
responsibilities of, the PEO and the client employer.
b.
The PEO must pay wages
and payroll taxes associated with shared employees as established in the PEO
agreement, either directly by the PEO or through a third party vendor contracted
by the PEO that is not a client employer. The responsibility for making these
payments is not contingent on receipt of payment from the client employer.
Shared employee wages must be paid by and reported under the PEO’s tax
identification number for federal tax purposes. A PEO may only enter into
agreements in which all employees of the client employer are shared and
reported under the PEO’s tax identification number for federal tax purposes,
but reported under the client employer’s policy number for workers’
compensation purposes, when:
i.
The client
employer’s payroll is wholly reported under the PEO employer’s tax
identification number for federal tax purposes; and
ii.
The client
employer’s payroll is wholly reported under the client employer’s policy number
for workers’ compensation purposes.
c.
Maintain adequate
and required employment related records for employees and for reporting such
information as required by appropriate governmental agencies.
d.
Comply with
applicable state laws regarding workers’ compensation insurance coverage.
e.
Maintain workers’ compensation
coverage under its policy number for all payroll reported under its tax
identification number for federal tax purposes, except as provided in section
IV.I.3.b.
J.
Reporting of payroll
and payment of premium.
1.
The AEO or the PEO
must electronically report payroll on BWC’s web site for each month no later
than the fifteenth day after the last day of the month for which the payroll is
being reported.
2.
The AEO or the PEO
must pay all premium and assessments concurrently with the monthly reporting of
payroll.
3.
If the AEO or the PEO
fails to make timely payment of premium and assessments, the AEO’s or the PEO’s
coverage will lapse, and BWC will revoke the AEO’s registration pursuant to ORC
4133.09 and OAC 4123-17-15.7, or revoke the PEO’s registration pursuant to ORC
4125.06 and OAC 4123-17-15.7.
4.
AEOs or PEOs with
zero payroll must file a monthly report.
5.
All client employers
must report actual payroll for the preceding policy year and pay any premium
due upon reconciliation of estimated premium and actual premium for that policy
year. See the Payroll True-Up policy for additional information.
K.
Client employer
information.
1.
The AEO or the PEO
must provide the client employer with a list of all of the following
information upon written request:
a.
All premiums and
payroll associated with the client employer;
b.
All workers’
compensation claims, including the compensation and benefits paid, and
established reserves for each claim; and
c.
Any other
information available to the AEO or the PEO from BWC regarding the client
employer.
2.
The AEO or the PEO
must provide the information listed above in writing to the client employer
within forty-five (45) days of receipt of the written request. The AEO or the PEO
has provided the information to the employer when:
a.
The information is
received by the US Postal Service; or
b.
The information is
personally delivered, in writing, to the client employer. Information sent via
email or fax is personally delivered at the time the information is sent by the
AEO or the PEO to a valid email address or fax number for the client employer.
3.
The client employer
may submit a complaint to BWC if the AEO or the PEO fails to comply with the
written request for information.
a.
BWC will investigate
the complaint to determine if the AEO or the PEO complied with the request.
b.
If BWC determines
the AEO or the PEO failed to comply with the request for information:
i.
BWC will provide the
requested information to the client employer. BWC will assess the AEO or the PEO
with the costs associated with the investigation and providing the information
to the client employer; and
ii.
BWC will notify the AEO’s
or the PEO’s client employers of the failure to comply with a request for
information and advise the employers of their ability to request such
information.
L.
Denial or revocation
of AEO or PEO registration.
1.
BWC will deny or
revoke the registration of an AEO, a PEO, or a PEO reporting entity if it fails
to comply with financial requirements.
2.
BWC may deny or
revoke the registration of an AEO, a PEO, or a PEO reporting entity, upon
finding the AEO, the PEO, or the PEO reporting entity:
a.
Obtained or
attempted to obtain registration through misrepresentation, misstatement of a
material fact, or fraud;
b.
Misappropriated any
funds of a client employer;
c.
Used fraudulent or
coercive practices to obtain or retain business or demonstrated financial
irresponsibility;
d.
Failed to appear,
without reasonable cause or excuse, in response to a subpoena lawfully issued
by BWC; or
e.
Failed to comply
with the requirements of OAC 4123-17-15 through 4123-17-15.5.
3.
Concurrent with, or
upon, the denial or revocation of the registration of an AEO, a PEO or a PEO
reporting entity, BWC may deny or revoke the registration of any AEO, PEO or
PEO reporting entity that is majority owned or commonly controlled by the same
entity, parent, or controlling person.
4.
The AEO or the PEO
may appeal a denial or revocation of status pursuant to the administrative
hearing procedure set forth in ORC Chapter 119.
5.
BWC’s decision to
deny or revoke an AEO’s registration or a PEO’s registration is stayed pending
the exhaustion of all administrative appeals by the AEO or the PEO. BWC may
notify client employers of its decision to deny or revoke the registration of
the AEO or the PEO provided BWC also notifies client employers the AEO or the
PEO has the right to appeal the decision.
6.
Upon revocation of
the AEO’s registration or the PEO’s registration, each client employer must
file payroll reports and pay workers’ compensation premiums directly to BWC, at
a rate determined by BWC, based on the client employer’s individual payroll and
claims experience.
7.
If BWC has denied or
revoked the registration of an AEO, a PEO or a PEO reporting entity, then any
of the following are prohibited from reapplying as an AEO, a PEO, or a PEO
reporting entity for a period of two years from the date of denial, revocation,
or rescission:
a.
The former AEO, the
former PEO, or the former PEO reporting entity; or
b.
Any applicant that
is majority owned, or commonly controlled, by the same entity, parent, or
controlling person of the former AEO, the former PEO, or the former PEO
reporting entity.
8.
If BWC has revoked
or denied an AEO’s registration, or a PEO’s registration, and all
administrative appeals are not yet exhausted, BWC will notify an employer who
inquires of the denial or revocation, and of the fact that the AEO or the PEO
has the right to appeal BWC’s decision.
M.
Resolution of complaints.
1.
AEO, PEO, PEO
reporting entity, and client employer complaints must be processed under the General Employer Complaint Policy.
2.
BWC has not
identified any extenuating circumstances specific to AEOs, PEOs, PEO reporting
entities, or client employers.