§7705 Certified professional employer organizations

Summary

Sets rules for businesses that want to be treated as certified professional employer organizations for tax purposes under section 3511. To get and keep certification, a business must meet background, location, tax, experience, and annual audit rules the Secretary sets. It must post and keep a tax bond, get regular independent financial reviews, follow reporting rules, use accrual accounting unless the Secretary allows another method, confirm periodically that it still meets the rules, and tell the Secretary in writing if something major changes. The bond must cover the period April 1 through March 31 and equal the greater of 5 percent of the organization’s prior-year liability under section 3511 (but not more than $1,000,000) or $50,000. The organization must provide an audit opinion as of an audit date six months after its fiscal year ends, and must file a quarterly statement about federal employment tax payments plus an examination-level CPA attestation by the last day of the second month after each calendar quarter ends. Controlled-group companies count as one organization. If required filings aren’t made, the certification rules can be treated as not met, and the Secretary may suspend or revoke certification. The Secretary will publish names and addresses of certified and suspended or revoked organizations. Definitions: certified professional employer organization — a business certified under these rules; work site employee — a worker covered by a qualifying written contract where the certified organization assumes payroll, tax, benefits, hiring/firing, and record duties, and at least 85 percent of workers at the site are covered. The Secretary will write regulations to carry this out, and these rules don’t otherwise change who is an employee or employer.