North Carolina Updates Professional Employer Organization Requirements

September 15, 2009

North Carolina Gov. Bev Perdue has signed into law stronger financial requirements for Professional Employer Organizations (PEOs) operating in the state.

The Professional Employer Organization Act (SB 1029), which unanimously passed both the House and Senate at the end of the last legislative session, is meant to provide more security for the small businesses that outsource human resource management, employee benefits, payroll and workers’ compensation to one of the state’s 143 licensed PEOs, according to supporters.

“The law definitely adds a new layer of safeguards and oversight to protect small business owners and their employers in a PEO arrangement,” said Milan P. Yager, executive vice president of the National Association of Professional Employers (NAPEO), the industry’s trade association.

“Even more importantly, the law clarifies that tax credits and other economic incentives remain with business owners sharing their employer responsibilities with a PEO,” added Yager.

Businesses using PEO services now have the option to sponsor their own benefit plans, according to Yager. The law also increases regulation and oversight of these self-funded plans, he said.

The Department of Insurance, which regulates PEOs, is charged with conducting a PEO Act study and presenting findings to the 2010 General Assembly with recommendations for additional improvements to the law.

The bill was sponsored by Senators Stan Bingham, David Hoyle, and Fletcher Hartsell and led through the House by Representative Bruce Goforth, who introduced companion legislation House Bill 1023 (H 1023).

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