Professional Employer Organization Bonds
In 2014 Congress passed the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014 which included a provision calling for the IRS to set up a Professional Employer Organizations (PEO) legislation and certification program. As part of the certification the PEO must post and maintain a Professional Employer Organization Surety Bond to guarantee the payment of federal employment taxes and must be in an amount that is equal to the greater of five percent of the Professional Employer Organization’s liability under section 3511 during the calendar year preceding the surety bond period, but not more that $1,000,000, but not less than minimum $50,000.
PEO Surety Bonds must be renewed each year on March 31.
What is a Professional Employer Organization?
A Professional Employer Organization (PEO) is a firm that provides a service of outsourced employee management tasks, such as employee benefits, payroll and workers' compensation, recruiting, risk/safety management, and training and development. In this practive of 'co-employment' thhe PEO becomes the employer of record for tax and insurance purposes, filing paperwork under its own Federal Employer Identification Number(s), while the client company continues to direct and manage the employees' day-to-day activities. PEOs will charge a service fee providing the human resources and payroll functions of the client company which is in addition to the normal employee overhead costs.
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