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Federal Certified Professional Employer Organization Surety Bond

Bond Penalty $50,000 to $1,000,000

The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 requires the IRS to establish a voluntary certification program for professional employer organizations (PEOs). The Federal Register has published final and temporary regulations relating to certified professional employer organizations (CPEOs), and the professional employer organization surety bond requirement.

Addressed in Section (3.)(e.), the Register states, "Section 7705(c)(2) sets forth the bond requirements that a person must satisfy in order to become and remain a CPEO. The provisions of section 7101 and its accompanying regulations apply to bonds required by section 7705(c)(2), except to the extent modified in the temporary regulations. The temporary regulations provide that a CPEO must post a professional employer organization surety bond for the payment of federal employment taxes in a specified amount. This specified amount is, for each period beginning on April 1 of any calendar year (or, in the case of a newly certified CPEO, on the effective date of certification) and ending on March 31 of the following calendar year (the bond period), an amount that is at least equal to the greater of: (1) Five percent of the CPEO's liability under section 3511 (or, if applicable, the liability as determined for newly certified CPEOs, discussed in section 3.e.i of this preamble) during the calendar year preceding the surety bond period, but not more than $1,000,000; or (2) $50,000. The proposed regulations require the bond to be issued by a surety company that holds a certificate of authority from the Secretary as an acceptable surety on federal bonds and meets such other requirements as the Commissioner may prescribe in further guidance."

One benefit of the PEO surety bond requirement in section 7705(c) is that the CPEO must submit to the bonding surety's financial underwriting process to obtain the bond, which provides the IRS with a certain level of assurance concerning the financial condition of the CPEO. The Treasury Department and the IRS believe that this benefit is substantially diminished if the CPEO obtains the bond by posting collateral in the amount of the bond. For this reason, the temporary regulations provide that the CPEO must meet the bond requirements without posting collateral.

The new regulations may be viewed here. As the obligation is a federal requirement, the surety must appear on the U.S. Treasury's list of carriers acceptable for federal undertakings.

National surety bond leader, Surety One, Inc. offers same-day servicing of your PEO surety bond request. Our special programs allow us to offer you bonding regardless of your credit and financial condition. Do you operate in multiple states? No problem! We offer surety bonds in all states and offer fidelity bond coverages for this class of business as well. Call (800) 373-2804 or email us at Underwriting@SuretyOne.com for a certified professional employer organization surety bond application or for information on any surety need.

What We Need From You

Additional Attachments

  • Current business financial statement.