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Hearing on HB 2092 would standardize PEO renewal date, tighten audit timing and require bonds for negative working capital
Summary
House Bill 2092, brought by the Secretary of State’s office, would move annual registration renewals for professional employer organizations to Oct. 15, require audits submitted with renewals be no older than 12 months, and require a bond for PEOs with negative working capital while removing letters of credit and securities as options.
The Committee on Commerce, Labor and Economic Development heard testimony on House Bill 2092, a bill submitted by the Secretary of State that would standardize Professional Employer Organization (PEO) registration renewals on Oct. 15, align audit filing deadlines with renewals and require that any audit submitted with a renewal be no older than 12 months. The bill would also require a surety bond for PEOs that do not have positive working capital and would remove irrevocable letters of credit and securities as acceptable forms of surety.
Clay Barker, general counsel for the Kansas Secretary of State, said the registrations were moved from the insurance commissioner to the secretary of state this year and the office recommends the changes “to better fit how the secretary of state operates.” He said there are 248 registered PEOs in Kansas—146 full registrations and 82 limited registrations—and that moving renewals to a single October 15 date would simplify processing for the office and for national filing services.
On the bond and surety changes, Barker said the Secretary of State’s office wants to limit the future surety option to bonds because “bonds are something the secretary of state is very used to working with” while letters of credit and securities require infrastructure the office does not typically handle.
Erica Bruhn, CEO of Lever 1 PEO (Overland Park) and leadership council chair for the Heartlands Region of the National Association of Professional Employer Organizations (NAPEO), testified in support and said PEOs routinely obtain bonds and were not opposed to requiring a bond should a PEO lack positive working capital.
Committee members asked how audits are used and whether the filings are public. Barker said the office checks the basic financials, primarily working capital (current assets minus current liabilities), and that the actual company financials are not public record. Representatives also asked who performs the audits; the answer in committee was that certified public accountants perform audits and that audited financial statements are submitted as part of the renewal filing.
Representatives asked whether limiting surety to bonds could make it harder for some PEOs to obtain required surety. Barker and Bruhn said bonds are commonly used in the industry but acknowledged that bonds are obtained from different firms than typical bank letters of credit.
No vote on HB 2092 was recorded in this hearing; the committee closed the hearing after proponents testified.
