PEO's - Good or Bad?

[The HIC Group]

I have only had conversations will carrier reps on the new plan designs. One of them being a PEO model, which I thought i would never see from a carrier. I was flat out told they were not being developed for small group.

Admin fees are too much for a small group to absorb. Take a group of 30 lives an they have to pay $18K a year in admin fees and still have to go through some type of underwriting. Nope, I don't think that will fly. 200 lives with a ton of risk, that does not want to take on lasers on a self funded platform, maybe!

Here is a scenario of one of my groups I have with TriNet PEO.

25 lives, admin fee is actually 25k/year.
They are saving 10k year on SUI, 5k in WC, and 20k in benefits by moving to TriNet's large group Oxford platform.

So they are saving 10k a year moving to TriNet, and do not have to invest in an HR dept and hire an HR employee (50-75k in soft costs)

But I've also received quotes where there wasn't any savings and a huge cost to the group to move to PEO so I would say each situation is different.

 

[ABC]

So you are getting bundled savings, is the group allowed to drop one of those lines?

I know Oxford as it is owned by UHC.

Are you able to service the PEO plan or does that fall onto the PEO admin?

25K is a lot, after the 1st renewal will there be savings?

The way I look at PEO pre ACA, is they are for groups that do not want to invest into their company with good people. Instead of forming a team of consultants they shift that onto the PEO. It may work the 1st year but in the short run they end spending more than if they hired a decent HR.

Every group is different.

Here is a scenario of one of my groups I have with TriNet PEO.

25 lives, admin fee is actually 25k/year.
They are saving 10k year on SUI, 5k in WC, and 20k in benefits by moving to TriNet's large group Oxford platform.

So they are saving 10k a year moving to TriNet, and do not have to invest in an HR dept and hire an HR employee (50-75k in soft costs)

But I've also received quotes where there wasn't any savings and a huge cost to the group to move to PEO so I would say each situation is different.

 

[The HIC Group]

So you are getting bundled savings, is the group allowed to drop one of those lines?

I know Oxford as it is owned by UHC.

Are you able to service the PEO plan or does that fall onto the PEO admin?

25K is a lot, after the 1st renewal will there be savings?

The way I look at PEO pre ACA, is they are for groups that do not want to invest into their company with good people. Instead of forming a team of consultants they shift that onto the PEO. It may work the 1st year but in the short run they end spending more than if they hired a decent HR.

Every group is different.

The only carve out that is allowed is the benefits but that is also the main cost saver. WC and SUI must stay with the PEO as the PEO is now considered the employer of record.

servicing falls onto the PEO admin, but brokers are still compensated at the same levels or higher.

savings do continue after year 1.
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fyi - I am not a huge advocate of PEO's but I believe they should have a place in every broker's portfolio.

The reason being ADP and Paychex control 1 of every 2 private sector businesses in the US. They do not work with brokers and are calling on their payroll clients everyday pitching them PEO and moving that business away from brokers.

Hope this helps...

 

[stuy119]

Benefits are not normally the main cost saver. Payroll is a HUGE cost to many businesses under the PEO formula.

You would also be surprised about the savings you can offer on a 401K plan that doesn't go through the PEO.

 

[ABC]

Post 2014, PEO may have to be in every independents wheel house.
When I go up against a group that is on a PEO I have always won. The savings has been huge by going out to market.

 

[The HIC Group]

Post 2014, PEO may have to be in every independents wheel house.
When I go up against a group that is on a PEO I have always won. The savings has been huge by going out to market.

I have seen huge savings as well by splitting up PEO groups. I have also seen savings by going into a PEO. It really is based on the "makeup" of the group and good to have a few PEO options if small group plays a decent role in your agency.

 

[ABC]

I have seen huge savings as well by splitting up PEO groups. I have also seen savings by going into a PEO. It really is based on the "makeup" of the group and good to have a few PEO options if small group plays a decent role in your agency.

You make an interesting point I have never thought about.

Could you take half of a group and put them on a PEO plan and then take the other half and put a group health plan in place?

Would a PEO allow you to split them up?

I don't know if that would be cost effective but who knows.

 

[The HIC Group]

You make an interesting point I have never thought about.

Could you take half of a group and put them on a PEO plan and then take the other half and put a group health plan in place?

Would a PEO allow you to split them up?

I don't know if that would be cost effective but who knows.

That's a really good question. I will try to find out and keep you posted. Stay tuned.

 

[devinmarchan]

In recent years, the demand for services provided by a Professional Employer Organization (PEO) has grown considerably. At XcelHR, we offer PEO, ASO, and HR outsourcing services to small- and mid- sized businesses.

 

[scagnt83]

Benefits are not normally the main cost saver. Payroll is a HUGE cost to many businesses under the PEO formula.

You would also be surprised about the savings you can offer on a 401K plan that doesn't go through the PEO.

Both of these statements are very true.

The 401k especially. I have seen fees on PEO 401Ks that were borderline criminal (or should be).
Not just that, but a 401k is a very specialized product that should be customized for each specific company. A PEO plan cant do that.

Imo, there are some very possible "breach of fiduciary" issues when using a PEO 401k. (if the issue was ever pushed)