New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
ONE COMMERCE PLAZA
ALBANY, NEW YORK 12257

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on October 23, 2006, representing the position of the New York State Insurance Department.

RE: Professional Employer Organizations

Question Presented:

May the employees of a Professional Employer Organization operating in New York constitute a group pursuant to N.Y. Ins. Law § 4235?

Conclusion:

Yes, in accordance with N.Y. Labor Law § 922(5), a registered Professional Employer Organization may be deemed by an insurer to be an employer within the purview of N.Y. Ins. Law § 4235(c)(1)(A) and thus, the employees may constitute a group pursuant to N.Y. Ins. Law § 4235.

Facts:

The inquirer represents XYZ Consultants, Inc. (XYZ) and wrote in reference to a proposed program that was evaluated by Opinion of General Counsel No. 5-11-17 (November 14, 2005). It was the Department’s opinion that the group to be issued health insurance under the proposed program did not constitute a permissible group pursuant to N.Y. Ins. Law § 4235.

Subsequently, according to the inquirer’s letter, XYZ obtained approval from the New York State Department of Labor for the program to operate as a Professional Employer Organization (PEO). The inquirer has asked whether the employees of the PEO can constitute a permissible group pursuant to N.Y. Ins. Law § 4235.

Analysis:

N.Y. Labor Law § 922(5) (LEXIS 2006), provides as follows:

5. A registered professional employer organization shall be deemed for purposes of state law an employer for purposes of sponsoring welfare benefit plans for its worksite employees. Worksite employees participating in that professional employer organization's fully insured welfare benefit plan or plans shall be considered employees participating in a single employer welfare benefit plan or plans. A fully insured welfare benefit plan or plans offered by a registered professional employer organization to its employees and/or worksite employees shall not be considered for purposes of state law a multiple employer welfare arrangement.

N.Y. Ins. Law § 4235(c)(1)(A) (McKinney Supp. 2006) authorizes the issuance of a group health insurance policy to employers covering their employees. Thus, in accordance with N.Y. Labor Law § 922(5), a registered PEO may be deemed by an insurer to be an employer within the purview of N.Y. Ins. Law § 4235(c)(1)(A).

This opinion is limited to the New York Insurance Law and the regulations promulgated thereunder. The Department offers no opinion on the materials the inquirer submitted to explain the PEO or whether the PEO is in compliance with the New York State Labor Law

For further information you may contact Assistant Counsel Brenda Gibbs Albany Office.