Ohio Professional Employer Organization Bond

What Is the Purpose of the Professional Employer Organization Bond?

The Ohio Bureau of Workers’ Compensation (BWC), Employer Services Division, PEO Unit requires each Professional Employer Organization (PEO) to file a surety bond if they have a working capital deficit shown in their financial statements. The bond assures the PEO’s compliance with the BWC’s rules and regulations and guarantees payment is readily available should the PEO fail to pay taxes, benefits, wages, or other entitlements due.

Who Needs the Professional Employer Organization Bond in Ohio?

A Professional Employer Organization provides services to help with human resource management and employer risk, makes and holds employer relationships with employees at clients’ worksites, and assumes some employer responsibilities, risks, and rights through a contractual obligation.

The bond is required for any PEO that cannot show positive working capital in their financial statements at the time of new or annual registration with the BWC, pursuant to the Ohio Revised Code Section 4125.051

The bond is for 12 months and will no longer be required when the PEO can prove they have positive working capital.

What Do Surety Underwriters Need to Know About the Professional Employer Organization Bond?

The bond form specifies that payment from the bond will be required when the PEO has failed to pay semi-annual workers’ compensation premiums. The regulations reiterate that payments of taxes, wages, and benefits must be made timely.

Since the bond is only needed when the PEO’s liabilities exceed its assets, there is generally an increased risk. With that being said, and after discussion with major surety companies, the likelihood of a claim is low and the losses are less in Ohio than the national average. The process to become a Professional Employer Organization is thorough, requiring a great deal of paperwork and fees. With the Bureau’s involvement, claims can generally be avoided.

It is generally recommended that surety underwriters perform a credit check of the applicant. It is unknown how the bond limit is calculated, but it is determined by the BWC. With large bond amounts, some surety companies choose to review the PEO’s personal and financial statements.

Sureties may cancel the bond with a 30-day notice to the Bureau of Workers’ Compensation.

What Do Surety Claims Handlers Need to Know About the Ohio PEO Bond?

Claims generate from the Ohio Bureau of Workers’ Compensation after a Professional Employer Organization has defaulted, not paying their state insurance fund dues promptly. The BWC may inflict penalties for any violations of the Ohio Revised Code Chapter 4125.

The bond has an expiration date and claims can only be filed during the 12-month period that the bond is active.

Can a Professional Employer Organization Avoid the Bond Requirement? 

The PEO can only avoid the bond requirement by showing positive working capital on their financial statements to the Bureau. If there is negative working capital, the only other option is for the PEO to file an irrevocable letter of credit or securities approved by the BWC.

How Much Does the Professional Employer Organization Bond Cost?

Are there different bond limits that need to be explained? Name the typical price range and what the price is based on. 

How Is the PEO Bond Filed to the Bureau of Workers’ Compensation?

Professional Employer Organization Bonds are to be signed, sealed and sent to the Ohio BWC alongside an authorization certificate of the surety company’s officer or representative.

All documentation must be sent to the following location:

PEO Unit, Employer Services Division
Ohio Bureau of Workers' Compensation
30 West Spring Street, L22
Columbus, OH 43215

Can the Ohio Professional Employer Organization Bond Be Cancelled?

Surety agents and brokers are able to cancel the bond by giving a 30-day mailed notice to the Ohio Bureau of Workers’ Compensation. The surety company and Professional Employer Organization are liable during those 30 days. 

How Long Is the PEO Bond Required?

The bond is for a set 12-month period, but if the Professional Employer Organization continues to show their liabilities exceed their assets another bond will need to be purchased for the next 12-month period. That cycle continues until positive working capital is achieved by the PEO and provable to the BWC by filed financial statements. Surety companies should correspond with the PEO as the bond’s expiration nears to see if there is a need for a bond for the upcoming year.