Is Your Business Big Enough for a PEO? A Size-by-Size Eligibility Guide
PEO and group insurance eligibility depends heavily on company size. Here's exactly what opens up at different employee thresholds.
1-4 Employees
Most traditional group health insurance plans require a minimum of 2 enrolled employees. At this size, some PEOs will accept you, but options are limited. ICHRA (Individual Coverage HRA) is often the most practical solution - it lets you reimburse employees for individual health insurance on a tax-free basis without the group plan minimum requirements.
5-19 Employees
This is where PEO eligibility opens up significantly. Most major PEOs accept groups of 5+. You gain access to large-group benefits pools, which typically means better coverage at lower cost than small-group insurance. HR and payroll administration becomes increasingly valuable at this size.
20-49 Employees
At 20+ employees, you become subject to additional federal compliance requirements (FMLA at 50, but ADA at 15, COBRA at 20). PEOs handle these compliance obligations as part of the co-employment arrangement. Benefits options expand further and negotiating leverage increases.
50-74 Employees
At 50 employees, ACA employer mandate requirements kick in (Applicable Large Employer status). PEOs help manage ACA compliance and reporting. You also gain access to the full range of large-group plan designs at this size.
75+ Employees
At 75+ employees, you may have enough scale to consider self-funded or level-funded arrangements, which can deliver significant savings for healthy groups. A&C evaluates both PEO and direct carrier options at this size to find the best total cost solution.