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There can be no lapse in coverage. You will want to carefully time the transition.

Some workers’ comp carriers may consider you a start-up company since you may not have had WC under your company’s name. This could negatively impact risk rating (MOD) and possibly the ability to obtain coverage.

A new payroll processor will be needed. Allow for plenty of lead time, prior to the PEO exit, to ensure a smooth transition. Coordinate with your insurance broker to avoid benefit related payroll deduction issues.

You will want to issue or reissue an employee handbook. You may have to coordinate some policies with that of the PEO (e.g. PTO/Leave, code of conduct, performance reviews, benefits, offboarding)

To allow for full insurance market and funding analysis, begin the process well in advance of the PEO exit. Some insurance carriers may consider you a start-up company because you have not had payroll and/or benefits under your name, and it’s highly likely the PEO will not release your claims data. If you have a waiting period for new hires, you will either have to get the carrier to waive it or you will have to pick up COBRA from the PEO during that period. If the PEO plan was fully or partially self-insured, you may have issues with continuing to get claims paid for claims incurred prior to your termination. You may be required to continue to pay administration fees until all claims are cleared. If the PEO plan was fully insured and had a deductible, your employees may have to submit EOBs to the new medical carrier to get deductible credit. It may be necessary to obtain HIPAA-credible coverage certificates for each employee.

In most cases, the PEO will be responsible to maintain COBRA for qualified participants prior to your termination.

Review the PEO contract related to this to confirm. This is important with the transition.

Each employee may have to arrange transfer of their PEO 401(K) into individual IRAs, and if rules permit, later transfer into your 401(k). Timing of deferrals with transfer of payroll processors will be critical to a smooth transition.

Be sure to review the PEO’s policies for vacation, sick leave, disability, FMLA and other forms of leave and how they might impact your departure. Establish your own policies immediately and document these in your handbook/manual. You may be responsible for anyone on disability leave at the time of your PEO termination; you may have agreed (in your PEO contract) to job restoration or other leave guarantees or rights. If your company has less than 50 employees and is not subject to full FMLA leave requirements, the PEO may have to retain that responsibility for anyone on FMLA at the time of your termination.

ACA and DOL compliance services should be considered when exiting a PEO. You will want to obtain these services through your benefits broker or other entity to ensure you remain in compliance with current regulations

The source of your HR advice will also need to be considered once you’ve exited the PEO.

You will want to consider how your employees will enroll in their benefits without the use of the PEO’s technology. Your benefits broker can assist with this.