Professional Employer Organization

[Guest Laura]

Is anyone familiar with the application of COBRA to an employer that has a contract with a professional employer organization ("PEO"), pursuant to which the employer and the PEO are "co-employers"? Specifically, my question is:

Does the termination of a PEO contract in and of itself give rise to a termination of employment for COBRA qualifying event purposes? What if the employer will provide full health insurance through a different carrier after the PEO is terminated?

Thanks in advance.

[Guest steve917]

if you terminate your contract with a peo they must offer your employees COBRA. The peo is the employer of record and therefore must offer your employees cobra

steve

PEO sales specialist NJ

[GBurns]

Since neither the DOL or the IRS recognizes a "co-employer" especially a PEO, I would seek experienced knowledgeable legal advice. You might also want to first get some basic knowledge of the problems that every employer who uses a PEO faces by visiting the Q&A columns especially "Who's the employer" and "Advanced Plan Design" also see if there is a COBRA Q&A.

[Guest Laura]

steve917 - thank you so much for your reply. i appreciate the input of an insider at a PEO. i assume based on your post that in your experience the PEO delivers such COBRA benefits. i have a client that has entered into a service agreement with a PEO that is silent on COBRA. my concern is that once the contract is severed, the PEO is not contractually bound to provide any services. is this a valid concern? or is it the case that PEOs take the position that they are COBRA fiduciaries and carry out their duties accordingly notwithstanding the lack of a contractual duty to do the same.

GBurns - unfortunately, I am a lawyer and this is my nut to crack. I've performed the research and have noted the ambiguities in the law, and the proposed legislative fix (that never passes). I'm just trying to figure out how other practitioners have construed the application of COBRA in light of such ambiguities.