Employer Qualifications and Special Circumstances

Professional Employer Organization (PEO) (Ind. Code § 22-4-6.5)

What is a PEO in regard to Unemployment Insurance?

Through a “co-employment agreement,” PEOs act as the “employer of record” for a company’s employees while the company remains responsible for hiring, firing, and overall management. This is done by reporting wages under the PEO’s F E I N. The PEO and employer are both jointly and separately liable for UI taxes.

Note: A PEO is not an Administrative Service Organization, or A.S.O. An A.S.O. is also an HR service provider, however, employers and A.S.O.’s do not enter into co-employment agreements. An A.S.O. does not share liability for UI taxes.

Difference Between PEO Level PEO and Client Level PEO

PEO Level PEOs report all their clients under a single SUTA account and F E I N. Client Level PEOs report all their clients under the PEO’s F E I N, however, each client has their own SUTA account. Clients of a Client Level PEO may have different “Merit Rates” from other clients of that PEO, whereas all clients of a PEO Level PEO will share the same Merit Rate.

Reporting Responsibilities

The PEO will assume responsibility for reporting quarterly wages for all their clients, as well as report all client additions and deletions. While PEO’s may report other employer updates, the employer may still notify the department of: mergers and acquisitions, demographic changes (address, phone, etc.), changes to responsibility parties, and Reports of Inactivation (SF46800) .

SUTA Accounts AND PEOs

What happens when the employer joins a Client Level PEO?

• If inactive, the account will be activated.
• The Client Level PEO will report all wages under the employer’s SUTA
• The following account updates will be made on the SUTA account:
  • The Department will change the F E I N of record to the PEO’s F E I N.
  • The Department will add the PEO’s legal name as the DBA name.
  • The Department will add the PEO as a Correspondence Agent.

If you do not have a SUTA account (in addition to the above)

A SUTA account will be created. The employer can register for this account on ESS. If the employer does not register, the Department will create the account for the employer. The information for the account creation comes from the SF52099. Only the PEO should submit a SF52099.

What Happens when an Employer exits a Client Level PEO?

• The Department will revert the F E I N of record back to the employer’s F E I N.
• The Department will remove the PEO as a DBA.
• The employer will be solely responsible for their reporting and payment liabilities.

What Happens when an Employer joins a PEO Level PEO?

• The Department will transfer 99% of the employer’s experience balance into the PEO’s.
• The Department will suspend reporting liabilities on the employer’s SUTA account.
• The employer’s inactivate SUTA account will be revivable until the account is either voluntarily or involuntarily terminated.

What Happens when an Employer exits a PEO Level PEO?

• If an employer is continuing payroll in Indiana, and is not joining another PEO, the Department will hold a 0.1% transfer out of the PEO. If the employer has a revivable SUTA account, this will be reactivated. If the employer does not have a revivable SUTA account, the Department will create a new one and mail the registration documents to the employer.
  • The employer will inherit the PEO’s merit rate for the year in which the transfer occurred.
  • The employer will have a blended rate the following year.

How does being a 501(c)3 Employer affect PEO reporting?

• A 501(c)3 that joins a PEO Level PEO will be liable for UI contributions on their first dollar of payroll.
• 501(c)3’s cannot be reimbursable while in a PEO Level PEO.
• 501(c)3’s that terminate their contract with a PEO Level PEO and continue payroll in Indiana will receive the new employer rate for the year that they leave the PEO.
• A 501(c)3 who wishes to become reimbursable must make their election via DWD Form 1065 by no later than December 1^st of the year prior to the year they wish for the election to take effect.

For questions, regarding how PEOs register or qualify, please see the Appendix.

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