Blog · Leaving a PEO

Leaving a PEO: how to move your health insurance without a gap

Growing companies often outgrow their PEO’s benefits. Here is how to time the exit, choose what replaces it, and keep every employee covered.

📅 Updated October 2026👤 Written by Amanda & Erik Moran, licensed brokers

Why companies leave

Common reasons owners give

They want to see and control what the health plan actually costs
Renewals keep rising inside a bundled PEO fee
They want a plan design or carrier the PEO doesn’t offer
They have grown large enough to get their own pricing
They want to pick their own payroll and HR tools
A merger or new ownership is changing the setup

What changes

What becomes yours when you leave

The health plan

You become the plan sponsor of your own group plan, or set up an ICHRA, which CMS now calls a CHOICE Arrangement. The new coverage should start the day after PEO coverage ends.

The market you buy in

Groups up to 50 employees buy small group coverage in most states, and up to 100 in New York; larger groups buy in the large group market, where your own data matters.

Payroll and enrollment

Deductions, eligibility files and new-hire enrollment move to your payroll and benefits systems.

Compliance

Plan documents, notices and, if you are an Applicable Large Employer, Forms 1094-C and 1095-C become your responsibility, with help from your carrier, payroll provider and our partners.

COBRA

Federal COBRA generally applies to employers with 20 or more employees in the prior year. Ask your PEO how it will handle people already on COBRA before you exit.

Timeline

A typical exit timeline

Day -120Read the agreementNotice period and termination terms

Day -100QuoteCensus and side-by-side options

Day -75DecidePlan, contributions and effective date

Day -60Give noticeIn line with your PEO agreement

Day -30EnrollEmployee meetings and payroll setup

Day 0EffectiveNew plan starts the day after the PEO ends

Your PEO agreement’s notice period sets the real deadline; some are 30 days, some longer.

Checklist

Before you give notice

A census with ages or dates of birth, ZIP codes and coverage tiers
Your PEO plan summaries and current employee contributions
Quotes for the new plan, with networks checked for your employees
An effective date that lines up with the PEO end date
A payroll provider ready for deductions and, if needed, ACA forms
An answer from the PEO on COBRA participants and final invoices

PEO FAQ

Common questions

Can we leave our PEO in the middle of the year?

Usually, yes. Check your PEO agreement for its notice period and any termination terms, then line up a new plan that starts the day after PEO coverage ends.

Will our employees’ deductibles reset?

Generally, yes: a new plan usually starts its own deductible and out-of-pocket counts. Some carriers offer deductible credit for a mid-year switch; ask before you choose the effective date.

Do we need our own plan documents after leaving?

Yes. Once you sponsor your own plan, you need the documents and notices that go with it, such as a Section 125 plan document if employees pay premiums pre-tax. Your carrier and our partners help put them in place.

Are we responsible for ACA reporting after we leave?

If you are an Applicable Large Employer, yes. ALE status belongs to your company and its related companies, not the PEO, so plan for Forms 1094-C and 1095-C with your payroll provider.

Sources: IRS: determining if an employer is an Applicable Large Employer; U.S. Department of Labor: COBRA; New York DFS: small group expansion to 1-100 employees.

Plan the exit with us

Leaving a PEO? Start with a review.

Send your PEO’s renewal or rate notice. Within 5 business days of receiving it, you get a written comparison with a plan of your own and a recommended exit date.

Send my renewal See the 51 to 99 guide Or call us: 863-270-9820

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