Leased Employees and ASRS Membership Obligations

Notice Re: Leased Employees

Contracting with third-party vendors that manage payroll benefits, human resources and other administrative functions is a common practice for many employers in today’s business environment.

New business models that use Professional Employer Organizations (PEOs) such as ADP, ADP Total Service, Insperity, Paychex and others to provide payroll management and other services allows employers to focus on their core business functions. But that does not automatically lead to your employees being categorized as “leased” employees for purposes of being excluded from ASRS membership and an employer’s obligation to remit ASRS contributions.

ASRS member employers that contract with such third-party vendors should not assume such arrangements automatically nullify employees from continued participation in the ASRS.

The vendor’s client services agreement is usually very detailed with respect to the services they provide. As a PEO, and in accordance with the principles of the National Association of Professional Employer Organizations, such a vendor is not a leasing company. The PEO model is very different from the leasing company model.  Arizona Revised Statute § 23-561 et seq details what constitutes a PEO.

The ASRS has recently discovered several member employers that have entered into agreements they believe shift their employees to a leased status, thereby terminating their employment status and making them no longer eligible for ASRS membership or required to remit contributions to the ASRS.  This is not the case in many instances, and past ASRS contributions are due from several of these employers.

The ASRS has requested, received and reviewed many of these employer agreements.  In each case, based on the language contained in the contract, the company the employer contracted with was providing human resource assistance, payroll, and sometimes benefit programs only.   The language did not state the company was leasing staff to a school or other ASRS employer.  The result was that some employers and employees owe back contributions, causing financial hardship to both parties.

If your employer has such arrangements with third-party vendors, we are requesting that you provide those agreements to the ASRS for review. We are happy to review these documents and provide you with direction regarding ASRS membership and your obligations to remit contributions.


Action Required!

Arizona Revised Statute § 38-716 (2) requires ASRS member employers to provide copies of any contracts with third party vendors that may imply that you, the employer, no longer employ employees, but lease them from an outside company.  If the ASRS determines there is an issue regarding the employment status of your employees, we will notify you.

Please submit (via secure email) any agreements you may have with third-party vendors that suggests you lease employees by April 8, 2015.  This will allow us to assist you with this issue and alleviate problems that may arise with regard to your employees and their ASRS membership benefits.

If you have any questions regarding this matter, contact Michele Briggs, Employer Relations Manager at 602-240-2022 or  Wendy Tobin, Employer Liaison at 602-240-2124 .

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