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Outside Influences

And How They Affect the PEO World 

The state of the economy, the insurance markets, and access to financing affect all businesses and industries. However, because PEOs serve small and mid-size businesses, and a multitude of industries, that extra layer magnifies the effect these forces have on PEOs. In the last year, the Small Business Efficiency Act (SBEA) has entered the picture.

The PEO Index, discussed in our first feature, provides a 10-year history of how the PEO industry tracks with unemployment data and the gross domestic product (GDP). The index shows not only that PEO clients fare better than non-PEO clients, but it also shows that the same elements that drive GDP growth or contraction can be applied to the industry. Increasing government regulation dampens productivity, but again, PEOs have a positive effect on their clients in this area. While the future of the economy is uncertain, the time is ripe for PEOs to reach out to help businesses make progress in a challenging environment.

The workers’ compensation insurance market is definitely in a better place than it was three years ago, but PEOs continue to face structural challenges and increased regulatory interest. While the National Council on Compensation Insurance (NCCI) has filed rate decreases in 30 states, seven states had rate increases. Carriers are also facing dismal interest returns on their investments, leading to adjusted pricing for customers, including PEOs. Some carriers have left the market, and while other carriers have absorbed those customers, regulators are responding to the failures. However, market condition now are generally stable and PEOs have ways to manage their risks.

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Departments

Healthcare

The Cadillac Tax Shifts Up a Gear

In the feature in the June/July 2015 issue of PEO Insider,® Sravya Boppana, Esq. and Malcolm Slee wrote about the impending arrival of the Cadillac tax—a nondeductible excise tax on high-cost employer-sponsored health coverage that will apply beginning in 2018. In particular, their article focused on Notice 2015-16 (issued in February 2015), which gave some valuable insight into how the Department of Treasury would administer the tax, and sought comments on certain open issues. Treasury had indicated that another notice would be forthcoming in 2015, and sure enough, on July 30, it came out with Notice 2015-52, which deals with additional procedural and administrative issues related to the tax. We do not believe that Treasury will release any additional notices discussing the tax, but its next move will likely be to issue proposed regulations. Notice 2015-52 does not set forth a specific timeline, but based on our discussions with Treasury officials, we believe they are targeting publishing the proposed regulations before the end of 2015. This article will describe some of the interesting issues addressed in Notice 2015-52, and in particular, how they could affect PEOs.

Executive Office

Defining Your Client Offerings

In this article, I will focus on how PEO C-suite executives determine service offerings based on their clients’ needs and what factors should be considered. I will also look at how PEOs adapt and grow with their clients’ specific needs.

Human Resources

Movement as an Industry to Support Our Veterans

I remember the final conversation and tears like it took place just last week. It had been something our family had been considering for some time as we reflected back on a humbling 13 years of active duty military service in the United States Marine Corps (USMC). Throughout their military careers, the men and women of our armed forces train extremely hard to be mission ready and to meet and exceed military goals. Yet, as they and their families face transition from active duty service to the civilian workforce, they are faced with a brand new set of challenges and defining moments. Our fearless leaders, retired Army Col. Garry Bradford, retired USMC Col. Greg Maisel, and their families know this transition and the associated obstacles all too well. So much so, that, over the years, they have made it a priority to leverage their firsthand experience, as well as our team at UniqueHR, to help the transitioning men and women of our armed forces.


Columns

The Inside Word

‘Alone we can do so little; together we can do so much.’ —Helen Keller Abram Finkelstein, 2016 NAPEO Chairman

At numerous times during the PEO industry’s development, regulators have called into question our authority or legal basis to provide services to our clients. Each time, the industry advocated its position and was generally successful at creating a regulatory environment in many states that defines our ability to provide co-employment services and showing regulators that our industry provides a valuable service to business owners and benefits employees, employers, and the state.

NAPEO Notebook

From California to Florida on NAPEO Business Patrick J. Cleary

As I write this, I am fresh from Newport Beach, California (tough duty, I know) after a few NAPEO events there. We had a PEO Primer, a California legal update, and our California Leadership Council Forum (LCF). We had a good turnout at all of them, helped along by some good content. California State Senator Janet Nguyen (R-34th District) joined us to talk about her priorities and about what we can expect on the horizon in California. She’s an American success story, having emigrated here from Saigon. She won what became the most expensive state senate race in history, with $10 million spent in total. She’s a Republican in a swing district, and she had a good pro-business message for us.


SBEA

The Small Business Efficiency Act Thom Stohler

The IRS announcement that it will accept applications for certification on July 1, 2016, raises many questions about how the Small Business Efficiency Act (SBEA) will work when the statute becomes effective on January 1, 2016. NAPEO raised these questions in a letter to the agency sent on August 25, and offered a solution for how the IRS could make the benefits of the SBEA accessible to PEOs that certify in 2016. However, a subsequent meeting with officials from the IRS on September 25 raised doubts about whether the IRS will support the NAPEO proposal. Even though individuals from the IRS raised issues with the proposals made by NAPEO, it is clear from the additional information the IRS requested that the agency is working on SBEA implementation.

NAPEO Advisor

PACE Act, California Fair Pay Act and Pay Stub Violations Farrah L. Fielder, Esq.

Q. What is the PACE Act? A. The PACE Act, also known as the Protecting Affordable Coverage for Employees Act, is a recent law that amends the definition of “small employer” for non-tax parts of the Affordable Care Act (ACA). Most notably, the PACE Act allows for individual states to define small employers as those with fewer than 50 employees in 2016 rather than requiring the states to increase the size of small employers to include those with 100 or fewer employees. Had the PACE Act not been passed, the small employer definition would have demanded the automatic employee number increase for plans from 2016 forward. For more information about PACE, see “Key Developments in the Healthcare Markets,” by Eric Foster, in the feature of this issue.


PEOs in the Community

The Power of Providing Programs that Help Develop Employee Skills Maria Black

In just 10 years, 75 percent of the workforce will be made up of Millennials—workers born between 1982 and 2000. As this new generation redefines the workplace, employee expectations are undergoing rapid changes, including a shifting outlook on work/life balance and increased expectations for growth, development, and educational opportunities.

PEO Spotlight

Quality Business Solutions, Inc.: Pamela and David Evette Stephanie Oetjen

Travelers Rest, South Carolina, is nestled near the North/South Carolina border at the foot of the Blue Ridge Mountains, not far from Greenville. The town got its name from the weary travelers and livestock drovers who in days past would stop in the town before making the difficult journey into the mountains, often spending the winter there while waiting for the snow to clear. Today, there is a 200-acre horse farm in this pastoral setting, which is home to Quality Business Solutions, Inc. (QBS). This 29-person PEO serves about 300 clients in 48 states. Its clients range in size from five to 40,000 worksite employees and come from a wide variety of industries, including hospitality, nursing homes, law firms, and manufacturing. However, QBS started out small, very small.


Global Insights

Regulatory Overreach Requires Systemic Reform Thomas J. Donohue

Three sprawling new rules by the Environmental Protection Agency (EPA) are symptomatic of a regulatory system in dire need of reform. On October 1, EPA finalized its rule to further tighten ground-level ozone standards, which would impact critical transportation projects nationwide and result in lost jobs. In August, the agency finalized the Clean Power Plan, a new rule requiring states to slash carbon dioxide levels by up to 30 percent by 2030, which would significantly drive up electricity costs for consumers. In June, EPA changed the definition of “navigable waters” under the Clean Water Act, dramatically expanding the federal government’s jurisdiction over private lands and imposing massive new costs on U.S. farmers, ranchers, and businesses.

 

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