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Glossary

You may find that some of the items in the Glossary provide a little practical information in addition to their defination. It was created to assist you with gaining knowledge into the Peo industry.

TermDescription
940 Form 940 is used to report your annual Federal Unemployment Tax Act (FUTA) tax. Together with state unemployment tax systems, the FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and a state unemployment tax. Only employers pay FUTA tax.
941 Employer's Quarterly Federal Tax Return. Report income taxes, social security tax, or Medicare tax withheld from ALL employee's paychecks. Peo’s will manages this report for all their clients
1099 *See Independent Contractor
Affordable Care Act/ACA The Affordable Care Act contains comprehensive health insurance reforms and includes tax provisions that affect individuals, families, businesses, insurers, tax-exempt organizations and government entities. These tax provisions contain important changes, including how individuals and families file their taxes. The law also contains benefits and responsibilities for other organizations and employers.
Certificate of Coverage A Certificate of Insurance, otherwise known as a COI (or if you're in the insurancebiz a cert), is a document that provides proof of coverage for the named insured, as shown on the certificate, to another person or entity known as the certificate holder, also shown on the certificate. It normally shows what is covered by a particular carrier… like workers compensation, General Liability or other, your limits of liability as well as the carrier and dates of coverage. Mos Peo’s cover workers compensation as part of their package while others can allow you to carve it out and keep your own. That will depend on your industry and the Peo you are working with.
Certified Payroll Certified payroll is a federal form WH-347, submitted weekly to the agency overseeing a government contract. The form lists every employee, their wages, the benefits they're entitled to, the type of work they did, and the hours they worked. It shows withholdings and gross wages and includes a statement of compliance.
Co-Employment The National Association of Prosessional Employer Organizations (NAPEO) defines co-employment as the contractual allocation and sharing of employer responsibilities between a PEO and its client.In a co-employment agreement, workers are technically employed by two separate entities: the business owner, or client employer, who controls their daily duties and core job functions; and the PEO, or co-employer, who handles personnel related functions. Co-employers do not supply a workforce; they supply services and benefits to a client employer and its existing workforce. The client employer maintains control of all business decisions and operations while the co-employer manages employee-related aspects of business operation.
COBRA The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan. If you are utilizing a Peo’s benefits program, they normally will manage all Cobra information to any qualified employee.
CPEO/Certified Peo A couple years ago, the Internal Revenue Service (IRS) rolled out a new voluntary certification for Professional Employer Organizations (PEOs), called “CPEO,” or the Certified Professional Employer Organization program. This certification program originated as a result of the Small Business Efficency Act in 2014.  Prior to implementation of the CPEO program in 2017, the IRS did not recognize the PEO relationship when it came to federal taxes, and this presented tax challenges for business owners who wanted to enter a partnership with a PEO, or transition from one PEO to another. This certification is still being updated and currently, only a handful of Peo’s are certified.. As the guidelines change, we expect more and more Peo’s to go through the certification process. Most states already have guidelines in place to help protect the business owner in regards to Peo services. CPEO provides an additional level of comfort.
Deck Page The front page (or pages) of a policy that specifies the named insured, address, policy period, location of premises, policy limits, classification codes, estimated payroll and other key information that varies from insured to insured. The declarations page is also known as the information page. Often informally referred to as the "dec" or "dec page."
E-Mod Stands for “experience modifier”, and is a rate modifier used by the NCCI (National Council for Compensation Insurance) to define the workers compensation risk of a particular employer.  Each company/entity has its own Emod, and this Emod is determined based on the previous three years of loss experience on a company’s workers compensation policy. Basically, your “MOD” will start at 1.0. Anything above a 1 means that you’ve had more claims cost that you paid in premium. Normally anything above a 1.0 is a surcharge (increase of cost) to your company… while the opposite also applies… anything under a 1.0 shows that you’ve been safer and that equates to a credit (decrease of cost) to your company. Each Peo will look at this data in order to see where you fit within their guidelines as they underwrite the risk to determine if you can join their Peo.. Since each Peo is uniquely different, you may find that even with a very high E-Mod, you may still be able to join a Peo.
EEOCThe EEOC is the Equal Opportunity Employment Commission, a federal agency created to ensure that employees in the workplace are not discriminated against on the basis on race, religion, sex, age, national origin, pregnancy, disability or genetic information.
ESAC ESAC accreditation is a compliance program for PEO best practices and financial reliability. Only about five percent of PEOs are currently certified. Accreditation provides business owners, PEOs and PEO state/federal regulators with verification and financial assurance of all key areas of PEO reliability for both IRS-certified and non-certified entities.
Embedded Health Insurance Embedded health insurance refers to a certain way that family deductibles are handled. In a family plan, each individual member covered by the insurance policy has their own deductible. However, there's also a family deductible. In embedded health insurance plans, this family deductible does not need to be met in order for the insurance company to pay for an individual's medical services. Only the individual's deductible is taken into consideration. Once that individual's deductible has been met, the insurance company handles all other expenses. An embedded deductible health insurance plan often reduces the overall cost of out-of-pocket expenses. When one individual in the family is the primary recipient of medical care, an embedded deductible allows the insurance company to assist with bills much sooner.
EPLI Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers (PDF) against claims made by employees alleging: Discrimination (based on sex, race, age or disability, for example) Wrongful termination. ... In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct, including (but not limited to) employment-related: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. The policies cover directors and officers, management personnel, and employees as insureds. Most Peo’s offer EPLI coverage as part of their program.. Some chareg additional while others do not. EPLI niormally comes with a deductible that can range anywhere from $500 to $200,000. The average Peo deductible is around $25,000. EPLI normally covers attorney fees due to the claim.
EPO-Medical An EPO (or “exclusive provider network”) is a bit like a hybrid of an HMO and a PPO. EPOs generally offer a little more flexibility than an HMO and are generally a bit less pricey than a PPO. ... But like an HMO, you are responsible for paying out-of-pocket if you seek care from a doctor outside your plan's network.
FICA The FICA tax is the amount of money Uncle Sam deducts from your paycheck every time you're paid. The money goes to the Internal Revenue Service first, then is steered into a Social Security fund to pay for Social Security program funding. A portion of your FICA tax also goes into the federal government's Medicare trust fund. (Medicare didn't launch until 1965.) FICA tax is typically 7.65% of earnings up to $132,900 (2019 figure). Employees pay 6.2% of their earnings for Social Security retirement benefits and their employer pays 6.2% for a total of 12.4% of a worker's income. An additional 1.45% tax is also collected to fund Medicare benefits and this, too, is matched by employers.
FLSA  The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009. Overtime pay at a rate of not less than one and one-half times their regular rates of pay is required after 40 hours of work in a workweek.
FMLA Covered employers must grant an eligible employee up to a total of 12 workweeks of unpaid leave during any 12-month period for one or more of the following reasons: for the birth and care of the newborn child of the employee; for placement with the employee of a son or daughter for adoption or foster care; to care for an immediate family member (spouse, child, or parent) with a serious health condition; or to take medical leave when the employee is unable to work because of a serious health condition.
FUTA Federal Unemployment Tax. The FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs. Only employers pay FUTA tax. The rate for FUTA is normally .60 of the FIRST $7000 in gross wages on a “per employee” basis. Once this limit is reached for an employe, it will not stat over again until Jan 1. A few states like CA and NY have higher FUTA rates until they pay back the monies borrowed from the Federal Government during times of high unemployment. Everytime a person changes jobs “new company” the “new” employer will have to pay FUTA on that person until the limit is reached.
Gross WagesBasically this is how much money a person “or a group of employees” earned BEFORE any deductions, taxes or other items are added or deducted.
HIPPA HIPAA (Health Insurance Portability and Accountability Act of 1996) is United States legislation that provides data privacy and security provisions for safeguarding medical information. The law has emerged into greater prominence in recent years with the proliferation of health data breaches caused by cyberattacks and ransom ware attacks on health insurers and providers.
HMO-Medical HMO stands for Health Maintenance Organization. HMOs have their own network of doctors, hospitals and other healthcare providers who have agreed to accept payment at a certain level for any services they provide. This allows the HMO to keep costs in check for its members. 2 factors included in HMO are: 1. You MUST choose a Primary Care Physician. 2. You MUST stay in netork to achieve optimal benefits of the HMO. Normally, HMO’s are lower cost but limit your doctor or provider choices, usually include a referral needed and approval before utilizing a specialist and have very limited in coverage if you travel away from your home network…. Doctors within an HMO will have to be “accepting new patients” as most have limits on how many members they can have.
I-9 Form An I-9 Form is the Employment Eligibility Verification Form required by the Immigration and Naturalization Services (INS) to verify your identity and your eligibility to work. All employees must complete this form and provide valid original identifications. You are not eligible for pay until Payroll Services receives a satisfactory I-9. Your Peo or Payroll company can assist with this form or training. A “new”version is expected to be released around.
ICE U.S. Immigration and Customs Enforcement (ICE) serves as the principal investigative agency of the U.S. Department of Homeland Security (DHS). ICE was created through a 2003 merger that combined the investigative and interior enforcement forces of the U.S. Customs Service and the Immigration and Naturalization Service.
Incentive Compensation Compensation that is linked to performance by rewarding employees for actual results achieved instead of seniority or hours worked.
Independent Contractor If you are a worker earning a salary or wage, your employer reports your annual earnings at year-end on Form W-2. However, if you are an independent contractor or self-employed you should receive a Form Misc-1099 from each business client that pays you at least $600 during the tax year. For example, if you are a freelance writer, consultant or artist, you hire yourself out to individuals or companies on a contract basis. The income you receive from each job you take should be reported to you on Form 1099-MISC. When you prepare your tax return, the IRS requires you to report all of this income and pay income tax on it. Your are still required to report all of your income even if you do not receive a 1099-MISC.
Independent Contractor/1099 The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. You/the business owner do NOT provide tools or transportation to the Independent Contractor.. Be aware that Peo’s will NOT cover 1099 contractors for workers compensation and only a few can assist to pay them (some Peo’s also have a “payroll only platform”. The Peo only covers W2 employees in regards to Workers Compensation.
Limits of Liability The maximum amount for which an insurance company may be held liable under a given policy. The normal Peo policy will carry workers compensation limits of $1 million. Depending on the Peo, you may be able to have that increased.
Loss Runs "Insurance loss runs refer to your business insurance claims history. For a Peo, they refer specifically to your Workers Compensation losses as they are looking at your claims history to determine if your company is a viable risk they can take. (Each Peo has different standards in regards to the type of risk they can accept). They are packaged in a report you can provide to prospective insurers when shopping for new coverage. Much like credit scores allow banks to determine whether you’re a good candidate for a bank loan or credit card, loss runs allow insurers to assess how risky your business will be to insure. Most carriers will require 4 years to current (valued). By requesting your loss runs, an insurer can review: The type of claims you’ve filed in the past The financial impact of your claims (settlement costs) The frequency of your prior claims By assessing this data, insurers can determine whether you’ll be a satisfactory risk (and profitable customer) or a high risk (and unprofitable). Depending on their conclusion, they may charge you a higher premium or decline to issue a policy for your business."
Medicade Medicaid provides health coverage to millions of Americans, including eligible low-income adults, children, pregnant women, elderly adults and people with disabilities. Medicaid is administered by states, according to federal requirements. The program is funded jointly by states.
Medicare The Centers for Medicare & Medicaid Services (CMS) administers Medicare, the nation’s largest health insurance program, which covers nearly 40 million Americans. Medicare is a Health Insurance Program for people 65 years of age and older, some disabled people under 65 years of age, and people with End-Stage Renal Disease (permanent kidney failure treated with dialysis or a transplant).
NCCI The National Council on Compensation Insurance (NCCI) is a U.S. insurance rating and data collection bureau specializing in workers' compensation. ... Cost analysis of proposed legislation regarding workers' compensation regulations and benefits. Although not all States utilize NCCI services, most do. NccI give advise, tracks cost, claims, rating as well as descriptions for each industry and class codes/workers compensation codes used.
Net Wages The amount of compensation after taxes and other payroll deductions are taken out.
Non-Embedded Health Insurance A non-embedded deductible requires the family deductible to be paid in full in addition to the individual's deductible before the insurance company will pick up the tab. A non-embedded deductible may also be referred to as an aggregate deductible or an aggregate health insurance plan.
Open Enrollment The time period, usually once a year, when employees can elect to add, delete or change coverages with no questions or qualifying events. Employers use this opportunity to determine what contribution changes they want to make for the new coverage period. Rates as well as some coverage items generally change at this point.
Pay-Cycle The accrued period for pay, such as biweekly, weekly, semi-monthly or monthly. *See pay-periods for more detail.
Pay-Day Basically, the day on which you receive pay for your work.
Pay-Periods Some people still get confused on how many actual pay-periods are witin any given pay-cycle.. So here you go.. 🙂 Weekly = 52 pay-periods, Bi-Weekly (every two weeks as there are 2 extra pay-days during the year) = 26, Semi Monthly = 24, Monthly = 12. *Note: Not all states allow for a Monthly pay-period. Your Peo or payroll provide can assist.
PEO Another name for Co-Employment or Employee Sharing. *See Co-Employment
POS - Medical A point of service plan is a type of managed care health insurance plan in the United States. It combines characteristics of the health maintenance organization (HMO) and the preferred provider organization (PPO). The POS is based on a managed care foundation—lower medical costs in exchange for more limited choice.
PPO - Medical PPO plans, or "Preferred Provider Organization" plans, are one of the most popular types of plans in the Individual and Family market due to their flexability. PPO plans allow you to visit whatever in-network physician or healthcare provider you wish without first requiring a referral from a primary care physician.
Professional Employer Organiztion *See Co-Employment
PTO Paid Time Off – A paid-time-off policy combines vacation and sick leave into one policy. Basically, the hours an employee has available to take time off work. A Peo or Payroll company can assist with setting up a PTO policy including tracking time earned and taken. They also have the ability allow the employee to see either via the web portal or pay-stub their available hours earned.
Qualifying Event (QLE) A change in your situation — like getting married, having a baby, or losing health coverage — that can make you eligible for a Special Enrollment Period, allowing you to enroll in health insurance outside the yearly Open Enrollment Period.
Rated Workers Compensation Coverage Generally, Ratings run anywhere from A to D with an additional class of carriers that are “Not Rated” due to different reasons. An “A” rated insurance company is considered one that performs at the top of its industry in creditworthiness (the ability to repay creditors and pay any claims presented) as well as how it performs financially when compared to its peers. Of the major rating organizations, many give ratings ranging from “A” or above to a “C” or “D” rating (C or D ratings are considered very weak.)
Sexual Harassment Sexual harassment is harassment or unwelcome attention of a sexual nature. It includes a range of behavior from mild transgressions and annoyances to serious abuses, which can even involve forced sexual activity. Most Peo’s can assits with training or policies that help protect your company from Sexual Harassment style law suits.
Short Rate Penalty A financial penalty against an employer who cancels an insurance policy prior to the set termination date of that policy.  This is usually seen in workers compensation policies. There is usually an easy way around this as more and more insurance carriers are becoming familiar with PEOs. If you are currently utilizing a Peo for Workers Compensation, there is normally NOT a short rate penalty if you leave the PEO.
Social Security Social Security in the United States is a social insurance program funded through dedicated payroll taxes called Federal Insurance Contributions Act (FICA). In 2018, employees were required to pay a 6.2% Social Security tax (with their employer matching that payment) on income up to $128,400. Any earnings above that amount were not subject to the tax. In 2019, the tax rate will remain the same at 6.2%, but the tax cap will increase to $132,900.
SUTA "The State Unemployment Tax Act, better known as SUTA, is a form of payroll tax that all states require employers to pay for their employees. SUTA is a counterpart to FUTA, the federal unemployment insurance program. Like the federal unemployment insurance program, the state unemployment insurance sets a limit to the wages taxed. This is known as a taxable wage base. The taxable wage base varies from state to state. The rate you pay also varies from state to state and depends somewhat on your claims history. The rate that a Peo has may be different than your current. Which rate is utilized varies depending on the rules per state and how the Peo is set up in that particular state. This unemployment fund was established to provide unemployment benefits to displaced workers. Who pays unemployment tax? Employees do not pay into this fund, as SUTA tax is an employer paid tax."
Time Clock A clock used to record the hours that employees work. These can be web based, basic time card, swipe card or Bio-Metric (fingerprint). All Peo’s have access to Time and Attendance systems. Normally this is an additional charge to services and you also pay for any hardware needed. If you have virtural employees, a single location or multiple locations, a Peo can normally assist with your Time Clock needs.
Tip-Wages "The United States of America federal government requires a wage of at least $2.13 per hour be paid to employees that receive at least $30 per month in tips. If wages and tips do not equal the federal minimum wage of $7.25 per hour during any week, the employer is required to increase cash wages to compensate. State law Though the vast majority of employers are bound to the federal minimum wage, some states have chosen to increase the tipped minimum wage above the federal requirement. Seven states (and the territory of Guam) apply the same minimum wage to tipped and non-tipped employees. The other 42 states – including those without state minimum wage laws – have a lower minimum wage for tipped employees than for traditional employees, and require employers to make up for any wages that fall below the minimum wage. Hawaii, which has the highest-paid waiters and waitresses in the country (mean wage: $17.84/hour) has a minimum wage of $8.50 for tipped employees."
Valued Loss Runs Basically means that the date the work comp loss run report was run is within 30 days of todays date… That ensures that there are no new claims that the carrier was not aware of and provides any updated payment details for outstanding claims. *See Loss Runs.
W-2 Form W-2, Wage and Tax Statement, is used in the United States income tax system as an information return to report wages paid to employees and the taxes withheld from them. The form is also used to report FICA taxes to the Social Security Administration. Relevant amounts on Form W-2 are reported by the Social Security Administration to the Internal Revenue Service. The Peo will handle all W2’s for any employee paid during the year that you ran through their system.
W-3 Form W-3 is a transmittal form that's sent to the Social Security Administration to show the total earnings, Social Security wages, Medicare wages, and withholding for all employees in the previous year. The official title of the form is "Transmittal of Wage and Tax Statements."
W-9  Form W-9, Request for Taxpayer Identification Number and Certification, is used in the United States income tax system by a third party who must file an information return with the IRS. It requests the taxpayer identification information of a taxpayer (usually in the form of a Social Security Number or Tax Identification Number).
Waiver of Suborgation A Waiver of Subrogation is an endorsement that prohibits an insurance carrier from recovering the money they paid on a claim from a negligent third party. An Owner Client may require this endorsement from their vendors to avoid being held liable for claims that occur on their jobsite. Some Peo’s will allow a Waiver of Suborgation, others do not. Some may charge an extra fee for this item.
Workers Compensation Insurance  Workers’ compensation (colloquially known as workers’ comp in North American English or compo in Australia) provides insurance to cover medical care and compensation for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the workers compensation system is known as “the compensation bargain”. While plans differ between jurisdictions, provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in worker compensation plans.

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Greg Yakoumis Owner, Founder

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