Category Business Insurance News

While there are many advantages to having a PEO manage your workforce, many times it is troubles with Workers’ Compensation Insurance that brings the client to a PEO.

Is it better to be with a PEO? To have a professional partner to assist you with risk management? We of course, have a bias, but here is another point of view. This is an excellent article written by Antony Kelly
Antony Kelly’s Article

Here are some excerpts we particularly liked:
“Simply put, traditional workers comp coverage will require a small business owner to make an upfront deposit, based on an estimate of their gross annual wages. The company will send quarterly information to the insurer, who then calculates the bill and requests payments. Since these are all estimates, however, an audit is required, including a reconciliation process that will help bring the numbers together. Unfortunately, if the deposits and quarterly estimates do not cover the total amount due, the company is mandated to reimburse the carrier at the end of the year. This could potentially be a substantial cut to the small business person’s cash flow. Interestingly enough, payments that extend beyond the balance may roll over into next years beginning balance; nice for the carrier, bad for the business owner. ”

“PEO companies not only provide you with pay as you go workers compensation but also outsourced benefits and a variety of resources that help you comply with employment related issues and administrative paperwork. In fact, many businesses under 100 employees should be able to significanly reduce their in-house administrative burden through the use of a PEO, which provides additional value over traditional and pay as you go workers comp plans. ”

Thank you to Antony Kelly for writing this article, and to Shane Underwood for finding it.

People ask us when they need a PEO, or even why?

Hard question to answer with anything other than “Maybe you don’t!”

Our staff can spend a lot of time telling you why you should have a PEO, and you can probably find some of that on other parts of this site. For fun though, and maybe for educational purposes, we asked them, “When DON’T you need a PEO?” Well they tossed it around the bullpen and surprise surprise, they came up with at least 7 scenarios when a PEO is not called for.

Here’s some situations they gave us when you DON’T need a PEO:

1: You don’t have any employees
2: You have employees but they cause no problems and create no risks
3: You are a government entity who cannot be sued
4: You are a very large company with an internal legal and HR department
5: You are a very large company with annual workers’ comp premiums in excess of $250,000. (In this case you should have your own, custom comp solution, such as a captive or a self funded plan. Ask us about that)
6: You are a short term company, not likely to be around for a while
7: You will never want to sell your company, or facilitate an easy ownership transfer

Can you think of some others? Please let us know!

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It seems that payroll companies are on the rise, and more and more they are looking for workers’ comp coverage for their clients.

Wouldn’t your payroll clients like to be free of the hassle of yearly audits?
Are they sick of massive deposits and big down payments?
Are they frustrated because they can’t find coverage?

We may be ably to help your payroll company with our “Pay As You Go” workers’ comp program. Premiums can be paid as earned, by rating the current payroll against the correct comp codes. Audits can be minimized, made less painful or possibly done away with completely.

This program is designed for payroll companies and their insurance agents. Please have your insurance agent contact us to find out about this income stream that is being left by the wayside.

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Shown here with strategic partner Jason Irving of Urban Recruiters Staffing, PEO Pros CEO John Will Tenney has written an article for Google Knols discussing the history of PEOs and how they differ from Staffing Companies.

“We get asked this question all the time.” Tenney tells us, “It’s not a simple answer. I expect this will only be the first of a few articles discussing it. For example, with a recovering economy such as we are in today, Staffing makes a lot more sense for business owners that are cautiously expanding their business.”

Here is the link to the Knol. Your comments and reviews are welcomed.

Excerpt: “In many ways, PEOs and Staffing companies are similar, but in fact they cover the opposite ends of the HR spectrum. In this article, John Will Tenney of PEO Pros explains the history and formation of PEOs, and a little of the differences and similarities between PEOs and Staffing.”

Why should an insurance agent work with a PEO Broker?

Here at PEO Pros / PAY-surance HR, we are often asked that question. Since many PEO Brokers are also insurance agents, the strategic partnership may not be obvious. However, most PEO Brokers are smart enough to leave traditional commercial insurance needs to the traditional commercial insurance agents. We certainly do. We figure they are experts at what they do, and we are experts at what we do. Why would we take business away from Agents who could use us for certain niche clients?

So What is That Niche?
There are several:

1: Difficult to place workers’ comp clients. Often times, a client who has difficulty procuring workers’ comp can get coverage by placing their employees with a PEO. This could be a smaller client who doesn’t have a lot of premium, a higher risk client or even a client who has had some claims history in the past.
2: Clients who have had a lot of unemployment claims. There is nothing better than a professional HR partner to assist in reducing unemployment claims.
3: Clients who have had HR difficulties, such as lawsuits from employees. Again, a professional HR partner can assist a client in putting in proper procedures to avoid unnecessary lawsuits.
4: Clients who wish to reduce employee turnover. Often the benefit solutions available from a PEO can offer that high level environment to a smaller client, in such areas as health insurance, 401k benefits, group life insurance and other areas.

We at PEO Pros / PAY-surance HR are always willing to talk to traditional agents and agencies about strategic partnerships. Often times our clients need a service they should get from those agents, such as commercial auto, property & casualty, general liability or even surplus lines and bonds.

If you are an agent, or an agency that is interested in this type of strategic partnership, please feel free to contact us using the form below.

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We are seeing more and more large carriers entering in to the Agency Captive arena, particularly with workers’ compensation premiums.

Some of these carriers are well known, 50-state, A-rated companies. (We will release names as soon as we get permission – promise!) These segregated portfolio loss funds are also called “workers’ comp agency captives.”

In these situations, Agencies can benefit from clients that have good risk management procedures and corresponding loss history. There is also the possibility of higher average commissions as well.

More information is in a “knol” article published by our lead agent John Will Tenney here.

So if your agency is interested in a risk-sharing, income opportunity using a agency captive you may wish to contact us using the form below.

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If you are shopping for workers’ comp insurance in the medium to large policy market, it’s a sure bet that you have heard the word “captive” at least once or twice.

In this article there are two types of workers’ comp “captives” that will be discussed.

The first is a group captive. There are many varieties of this flavor. This is a situation where a number of companies pool their resources and set up a small insurance company to insure some part of their risk. They can be shared or segregated. There must be some degree of risk sharing to meet legal requirements.

Some of these are often called a “rent-a-captive.” In some cases this captive is used to reduce the costs associated with a high deductible master policy. For example, if your company has a million dollar per claim deductible (a typical high deductible), you could use a “Buy Back Deductible Captive Policy” to assist with reducing the negative effect of high reserves.

For more information on one type of “buy-back-deductible-captive” – please take a look at Kris Delano’s article. Kris works with us on these type of captives.

Another breed is called a segregated portfolio fund. This is usually held “captive” by a carrier and the risk sharing comes between the captive owners and the carrier.

Both captive plans are designed to help entities with large premium recover some of the premium, based on a good loss ratio. They are also designed to recover some of the losses from the insured (in favor of the carrier of course.) In this way they resemble retroactive plans, also known as “retros.”

In all cases, the shared risk encourages both parties to concentrate more on safety and reduced accidents for a single motive: profit.

Both plans offer some tax advantages due to the increase in tax deductible premium paid up front. If there is underwriting profit, there are options as to when to declare the profit that allow the captive owners to be more selective as to how much tax they will have to pay every year.

Also, since the reserves set for claims will be stored in the captive, and NOT in the carrier’s bank account (reserves are not tax deductible), there is another tax advantage here.

If all this is confusing, please consider consulting with a captive expert before proceeding in to one of these agreements. There are many options to consider, and many steps that require negotiation.

At PEO Pros we do not offer “retail captives.” All of our captive arrangements are negotiated individually, tailored to fit the needs of the client. It is very likely that captive clients will save money by having us negotiate the captive agreement for them.

Please use the form below if you would like more information on a captive situation.

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When is a worker an employee and when is a worker an independent contractor?

Employers worry that they may have an independent contractor that is actually an employee. Please remember this important fact: There is no such thing as a 1099 employee.

The worker is either an employee, requiring tax withholding and an issued W-2, or they are an independent contractor.

Things change from state to state. We are asked this question quite often by our payroll consulting clients, not only here in Orlando, but throughout the state of Florida and even nationwide.

Here is a list of questions the state of Florida uses to determine the status of a worker:

A “Yes” answer for the following questions indicates that the worker is an employee:
1. Does the business provide instructions to the worker about when, where and how he or she is to perform the work?
2. Does the business provide training to the worker?
3. Are the services provided by the worker integrated into the business’ operations?
4. Must the services be rendered personally by the worker?
5. Does the business hire, supervise and pay assistants to the worker?
6. Is there a continuing relationship between the business and the worker?
7. Does the business set the work hours and schedule?
8. Does the worker devote substantially full time to the work of the business?
9. Is the work performed on the business’ premises?
10. Is the worker required to perform the services in an order or sequence set by the business?
11. Is the worker required to submit oral or written reports to the business?
12. Is the worker paid by the hour, week or month?
13. Does the business have the right to discharge the worker at will?
14. Can the worker terminate his or her relationship with the business any time he or she wishes without incurring liability to the business?
15. Does the business pay the traveling expenses of the worker?

A “Yes” answer for the following questions indicates that the worker is an Independent Contractor:
16. Does the worker furnish significant tools, materials and equipment?
17. Does the worker have a significant investment in the facilities?
18. Can the worker realize a profit or loss as a result of his or her services?
19. Does the worker provide services for more than one firm at a time?
20. Does the worker make his or her services available to the general public?

Confusing? Yes. Is it risky? Yes it is. The federal government and the IRS are under a directive to reduce the abuse of the 1099 classification. Make sure your contractors are truly independent contractors. If you are unsure, you may want to check with an expert.

If you would like further information from us please call 800.788.8343 or use the form below:

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Many times a day, we are asked if there is a way to get a discount on workers’ comp premium. In Orlando, other parts of Florida, and indeed nationwide, this is a daily part of our workers’ comp quotes process. There are both short and long answers to this.

Short Answer: “Yes, sort of …”

Long Answer
Every state in the country handles workers’ comp their own way, and not surprisingly, no two states are alike. however, at the risk of generalization, we will put states in two categories: Administrative States and Loss-Cost States. Each is discussed below.

Administrative Rates
Many states set the rates for workers’ comp, or at least the “base rate”. Florida, for example, defines the manual rate for each workers’ comp classification code, with help from the National Council for Compensation Insurance (NCCI). These rates can be modified by various factors, including credits for a drug free workplace, a written safety program, a very complicated and confusing program for construction credits, and for all companies the actual claims experience can be taken in to effect.

Loss Cost Factors (LCF) or Loss Cost Modifier (LCM)
Other states may have a base rate table which is multiplied by the insurance carriers LCM, as determined by historical claims data. In addition, some states let the carriers set their own rates for each class code, which is then put through an extensive approval process.

Stay with us, we told you this is the Long Answer …

So how does this help a business owner get discount rates? There are two options we will discuss today, traditional policies and co-employment solutions using a PEO.

In a state like Florida, the traditional policy rates can only be affected by credits and experience modifiers. Credits are offered for a verified, written safety program (2% discount) and a certified Drug Free Workplace program (5% discount). There are also some very confusing credits for new construction, which have not been a major factor in the last few years, sadly. A company that has been paying comp premium for more than 2 years may also be eligible for an Experience Modifier Adjustment. Every new company starts with a multiplier of 1.0, that is, no modification at all. Have a couple of good years with no claims, that multiplier can be less than 1.0, say .92 or .83 for example. Have a couple of bad years with a lot of claims and that multiplier can go up. There are also programs which can refund premium or pay dividends to policy holders, but these are usually restricted to annual premiums of $50,000 or more.

Using a PEO in a Co-Employment Situation is a completely different scenario. In this case, the PEO becomes the employer of record (for comp purposes among others) and pays whatever rate they pay for their employees. Since the client’s employees are now the PEO’s employees, the client no longer pays comp premium, but instead pays a service charge to the PEO. This number is unregulated and negotiable. It is possible for a safe client to negotiate a much lower rate on workers’ comp. Conversely, a client who can’t get coverage from a traditional carrier (because their risk is actually much higher than the state set rate would bear), can get coverage from a PEO by negotiating an equitable service charge.

So while paying a PEO is technically not paying for workers’ comp insurance (it’s their insurance, not yours), you can get your employees covered at a discount rate.

If you have more questions on this topic please use the contact form below:

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From California’s Workers’ Comp Executive Site

California’s self-insured group (SIG) industry suffered its first official failure yesterday when Department of Industrial Relations director John Duncan declared the Contractors Access Program of California (CAP) in default due to insufficient funds. The workers’ comp SIG had less than half of the funding required by the state and efforts to correct the deficit by collecting from members who are jointly and severally liable, have been unsuccessful.

With the declaration of default, DIR transferred responsibility for benefit payments for injured workers to the Self-Insurers’ Security Fund (SISF). Duncan said he understood the seriousness of the action for CAP’s member employers, but maintains it was necessary after remedial actions failed to correct a deficit that exceeds 50% of the group’s required funding. He noted that member employers will be addressed “fairly and equitably.”

The group’s daily operations have been under the control of Bickmore Risk Services since May when DIR wrested control of the SIG from New York-based Compensation Risk Managers (CRM), which now operates as Majestic Capital. While SISF now has responsibility for claims payment it also has access to the group’s remaining assets and security deposit. Additionally, efforts to recoup additional funds from the group’s member employers are expected to continue.

The full scope of the members’ financial liability has not been made public, but DIR says that it had less than 50% of the funding required by state law. A lawsuit filed by 11 members of the group against CRM and brokers is seeking tens of millions of dollars in damages to help off-set their joint and several liability that’s estimated to be in excess of $20 million.

Look for additional coverage in the next premium edition of Workers’ Comp Executive.

Note: There are no PEOs in the SIG that we know of. PEOs are normally required to carry full insurance.