NAPEO: National Association of Professional Employer Organizations

August 2014
The text of the Affordable Care Act (ACA) on the website is 906 pages, about two reams of copy paper. The Computational Legal StudiesTM website ( posts a version that comes in more than twice as long, at 1990 pages. The official, certified version on the U.S. Department of Health and Human Services (HHS) website is 2,409 pages. According to, the 109 final regulations account for a combined 10,535 pages in the Federal Register. Ugh.
    Okay, so the size of the various versions depends on type size and margins, but the ACA is still big and confusing, as PEOs have seen over the last four years of learning to comply with the law and its regulations. PEOs have always dealt with complicated and confusing things for their small business clients, and the ACA is no different.
    It helps to break things down into pieces and make a flowchart. Take integrating ACA compliance into your PEO's operation, for example. When you need to integrate new requirements into each operational area, the place to start is with your data: hours and pay types, employment status, applicable large employers, and individual employee reporting. Your benefits team has compliance obligations—everything from SBCs and SPDs to exchange notices and subsidies—so it helps to add them to the flow.
    The same method can be applied to employer mandate compliance, the SHOP exchanges, open enrollment, and future compliance issues such as the “Cadillac” plan tax.
    The foundation of your ACA compliance flowchart, however, is best practices. NAPEO's Healthcare Taskforce has completed and the NAPEO Board of Directors has approved four best practices so far—exchange notices, W-2 reporting, transitional relief, and onboarding new clients and employees—with more to come, to help you populate your compliance flowchart.
    These best practices and numerous other ACA resources are available to members in NAPEO's Healthcare Reform Resource Center at In addition, NAPEO recently partnered with the National Association of Health Underwriters (NAHU) to provide NAPEO members with discounted access to NAHU's online ACA certification course, available at

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executive office
The Affordable Care Act
The PEO Industry's Next Big Game-Changing ‘Must Do'

Stephen Cilley
It is hard to imagine another law as far-reaching and impactful to both PEOs and businesses than the Affordable Care Act (ACA). However, with every cloud comes a silver lining, and the ACA is no exception.
    As an industry, we have always worked within the law to find ways to bring cost savings to our clients. We've worked hard to develop a more efficient way for our clients to work. As business and our industry have changed over the years, and markets have hardened, we've found ways to survive. But, survival is not a long-term strategy—we'll never grow as an industry, or as individual companies, if we focus on surviving. We must look...

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In the Trenches After the ACA
Day-to-Day Experiences of a PEO Benefits Department

Kellie Ledbetter
In the PEO world, benefits manager is not an ivory-tower position. I work with my team to enter, reconcile, and correct benefits information on a daily basis. Each person on the team fields phone calls from co-employees and clients. Normal life for us was complex and demanding before the Affordable Care Act (ACA).
    Client Concerns: As soon as the ACA went into effect, clients began calling with concerns, but...

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risk management
EPLI Claims
How One PEO Avoids and/or Manages Them

Christine Pahl, PHR
We frequently hear that ours is a litigious society. In fact, one need only turn on the television or drive down a highway to see the proliferation of attorney commercials and billboards.
    Business litigation is no exception. I'm astounded at the sheer volume of employment practices liability insurance (EPLI) claims in recent years throughout the U.S. and have theorized, as have others, that people become more litigious during difficult economic times. Logically speaking, though, the numbers speak for themselves. The more terminations that take place, the more possibilities exist for claims alleging that the terminations were done for an unlawful reason.
    The PEO should...

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How to Say It Best
Benefits Administration

Clay M. Kelley, PHR
Last year, I penned several articles for PEO Insider® discussing powerful ways to explain how PEOs help clients. Those articles offered a simplified value proposition: “We solve problems in the areas of human resources, workers' compensation, risk management, employee benefits, and payroll. Our goal is to help you increase profitability, maximize employee productivity, reduce time spent doing transactional human resources activities, reduce employment-related liability, and ultimately lower labor costs.”
    In this article, I am going to address the benefits administration value proposition and how we actually deliver on the value proposition. Every PEO offers different services, so it will be important for you to filter your explanation of the value proposition based on your PEO's service offering.
    This should go without saying, but involve counsel in developing your sales program. Don't offer to do what you don't do. Make sure your salespeople understand the rules. Finally...

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the inside word
Working Together with the Big Picture in Mind
Mark C. Perlberg
2014 NAPEO Chairperson

As we all know, constructive conversations can often prove to be difficult. As a result, we have a tendency to sometimes “talk around issues.” This can help to avoid conflicts. The problem, of course, is that we fail to put genuine issues on the table, which makes them difficult, if not impossible, to resolve.
    I am pleased to report that we managed to avoid this pitfall at the June meeting of your NAPEO Board of Directors. Concerns were raised. Frank discussion ensued. That is the good news. The challenge is that important work now needs to be done. Let me be more specific: although many issues unite us in this industry, there are also obvious points of difference. We all want PEOs to be “recognized” and we want to avoid disruptive, mandated changes to our business models. But, when it comes to those business models...

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napeo notebook
So Much for the Summer Doldrums...
Patrick J. Cleary
June and July were busy months here at NAPEO—so much for the summer doldrums. June, of course, featured our PEO Capitol Summit, summarized on pages 61 to 70 in this issue of PEO Insider.® We had a great turnout and a great program.
    Before the meeting began, the Alliance for PEO Electronic Compliance (APEC) and NAPEO blessed a memorandum of understanding—later ratified by the NAPEO Board of Directors—that covers APEC's development of a new and improved state regulatory database. The people at APEC have done great work on eCal, an electronic calendaring system for the PEO industry. We have seen their work and know of their expertise in software and in this industry, so we partnered with them to dramatically upgrade our database. Our members consistently rank the database as a top member service. When APEC is done with it, it will be dramatically more...

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up front
Huge Opportunity for PEO Industry
PEO Educational Track at Workers' Compensation Institute Annual Conference

Abram Finkelstein
It is without question that, in most states, workers' compensation compliance is a critical issue in PEO operation. For more than 20 years, the Florida Workers' Compensation Institute has put on an educational event that has expanded to become one of the premier events in workers' compensation compliance throughout the country. The event draws more than 5,000 attendees from the insurance community, including agents, underwriters, adjusters, healthcare providers, regulators, attorneys, and judges, all of whom descend upon Orlando to discuss the pending issues and solutions in the workers' compensation environment. Therefore, when the event organizers sought to add an entire track dedicated to the PEO industry, it was a great opportunity for PEOs to spread the message about our positive impact on the workers' compensation landscape in Florida and the whole country...
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napeo advisor
Regulatory Overreach, Spanish I-9, Harassment Penalties, Hostile Worksite, Equal Pay Act
William J. Schilling, Esq.
Q. I heard recently that a court chided the Equal Employment Opportunity Commission (EEOC) for suing an employer for using credit checks in a manner similar to the way that the EEOC itself uses them. What gives?
    A. The Sixth Circuit Court recently affirmed a summary judgment for Kaplan Higher Education Corporation (Kaplan) in a case where the EEOC had alleged Kaplan' s use of credit reports had a negative, disparate impact on African-American applicants. In the short opinion (EEOC v. Kaplan Higher Education Corporation, ---F.3d ---, (6th Cir. 2014), the court was clear it was not impressed by the EEOC' s claims that Kaplan misused credit reports or by the methodology the EEOC used to prove its claims. Among other comments, the court...

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statehouse update
States and the Minimum Wage
Paul Richman and Daniel Harris
In 2013, President Obama first proposed an increase in the federal minimum wage from $7.25 to $9.00 an hour. Subsequently, in 2014, the president proposed an increase in the federal minimum wage to $10.10 per hour. In a move to put pressure on Congress to act on the proposal to raise the minimum wage, President Obama on February 12, 2014, issued an executive order that raised the minimum wage to $10.10 per hour for work performed by anyone who contracts with the federal government. The executive order takes effect on January 1, 2015. Although odds remain low that Congress will raise the $7.25 per hour federal minimum wage any time soon, the issue is one that remains on the agenda for Congress to address and will be presented as an issue that congressional Democrats will raise on the campaign trail leading up to the November 2014 mid-term elections.
    Today, 22 states, plus the District of Columbia, have...

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The Journey Toward Industry Credibility
Rex Eley
Credibility (trustworthiness, reliability) is critically important to the long-term success of any company or industry, not only in the marketplace but also in the regulatory arena.
    The Historical Case for Industry Credibility: In the late 1980s and early 1990s, leaders of NAPEO, nee the National Staff Leasing Association (NSLA), realized that establishing credibility was not only important to industry success, but was in fact essential for survival.
    The industry's service model did not fit existing state and federal regulatory frameworks, and there were frequent industry failures. It is easy to understand why some regulators concluded this new service concept must be illegal. In the early to mid-1990s, association leaders took significant steps to...

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small business perspective
While Congress Vacations, Small Business Struggles
Dan Danner
For much of America's history, optimism has been a common trait among small business owners, but, for most of the past five years, the outlook among Main Street's entrepreneurs has been pretty dismal.
    Although the most recent pulse-check taken of the sector by the National Federation of Independent Business's Research Foundation discovered a faint flicker of hope, the likelihood of sustained growing enthusiasm among owners of small firms is slight.
    One economist suggested this uptick in hopefulness may have been sparked by a “high-end recession reading”—meaning owners are probably wishing the long-struggling economy is finally showing some signs of improvement. That wouldn't be an unusual dream for these business-builders. Having suffered months of uncertainty, sluggish sales, and rising operating costs, they're eager to grasp any positive straw.
    Then again, this tidbit of euphoria could be due to the onset of Congress' annual summer recess...

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peo spotlight
The Employer Services Assurance Corporation
Continuing to Move the PEO Industry to the Next Level

Stephanie Oetjen
Today, people entering the PEO industry find a much more inviting business environment than those who entered in the early days. Joel Duncan, president and CEO of Merit Resources, Inc., Des Moines, Iowa, can tick these advantages off on his fingers:
  • “There is greater receptivity from both state and federal regulatory bodies;
  • States are now allowing ESAC accreditation in lieu of their specific registration criteria, saving both the state and the PEO money;
  • There is greater receptivity/acceptance from the AICPA and other accounting associations (accountants are key influencers for small businesses); and
  • There are improved relationships with historic insurance providers for the industry and greater interest from new entrants.”
    Today's PEO business environment stands in stark contrast to the one from which the industry sprang. As with just about all things PEO, the reasons for...

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global insights
Small Businesses Can Beat Cybercrime
Thomas J. Donohue
Many cybersecurity experts say that there are two types of businesses today—those that have been hacked and know it, and those that have been hacked and don't know it. As large businesses strengthen their cyber protections, small and medium-sized ones are increasingly the targets of online criminals.
    When small and mid-size businesses realize that they may be vulnerable to attack, many automatically conclude that they don't have the resources to adequately protect their networks and data. But there are, in fact, a number of innovative, cost-effective actions that all businesses can...

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NAPEO Medallion Partners
NAPEO Thanks its 2014 Medallion Partners
Diamond Partners

F.W. Davison and Company         Risk Transfer Holdings        
Platinum Partners

Artex Risk Solutions, Inc.         Compass Consulting Group, Inc.         Humana         MassMutual Retirement Services         McHenry Consulting

Summit Software         ThinkWare Corporation         Transamerica Retirement Solutions
Gold Partners

ALLInsurance Solutions Management, LLC         Avalara         MetLife         PayPlus Software, Inc.         Pinnacle Financial Services, Inc.
Silver Partner

eflexgroup, Inc.         Fisher & Phillips LLP         Human Resources Mexico, S. de R.L        
Bronze Partners

Capital Alliance Corp.         Complyright Distribution Services, Inc.         NetWise Technology

ResourceDirect         SaaShr / A Kronos Company         U. S. Risk Inc.      

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