capacity to handle all of our operations on a stand

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capacity to handle all of our operations on a stand-alone basis, if required. Periodically, we perform testing to ensure our
disaster recovery capabilities remain effective and available. We leverage the hosting facilities and related infrastructure that
we originally designed for our PEO HR Outsourcing solutions system to support the systems required for our business
performance improvement services offered through our SBUs. We also utilize additional leased hosting facilities for certain of
our business units.
Our network infrastructure is designed to ensure appropriate connectivity exists among all of our facilities and
employees and provides appropriate Internet connectivity to conduct business with our clients and worksite employees. The
network infrastructure is provided through industry standard core network hardware and via high-speed network services
provided by multiple vendors.
We have incorporated a variety of measures to maintain the security and privacy of the information managed through
our systems and applications. These measures include industry standard technologies designed to protect, monitor and assess
our data centers and network environment; best practice security policies and procedures; and a variety of measures designed to
control access to sensitive and private information.
Industry Regulations
The operations for our PEO HR Outsourcing solutions are affected by numerous federal and state laws relating to tax,
insurance and employment matters. By entering into a co-employer relationship with our worksite employees, we assume
certain obligations and responsibilities of an employer under these federal and state laws. Because many of these federal and
state laws were enacted prior to the development of nontraditional employment relationships, such as PEOs, temporary
employment and outsourcing arrangements, many of these laws do not specifically address the obligations and responsibilities
of nontraditional employers. Currently, 41 states have passed laws that recognize PEOs or require licensing, registration or
certification requirements for PEOs, and several others are considering such regulation. The SBEA, which was enacted in
2014, will establish a certification program and create a federal regulatory framework for the payment of wages to worksite
employees and for the reporting and remittance of payroll taxes on those wages by CPEOs. This law will be effective January
1, 2016.
As an employer, we are subject to federal statutes and regulations governing the employer/employee
relationship. Subject to the issues discussed below, we believe that our operations are in compliance, in all material respects,
with all applicable federal statutes and regulations.
Employee Benefit Plans
We offer various employee benefits plans to eligible employees, including our worksite employees. These plans
include:
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a 401(k) retirement plan
cafeteria plans under Code Section 125
a group health plan, which includes medical, dental, vision and prescription drug coverage, as well as a work-life
program
a health savings account program
a welfare benefits plan, which includes life, disability and accidental death and dismemberment coverage
a health care flexible spending account plan
an educational assistance program
an adoption assistance program
a commuter benefits program
Generally, employee benefit plans are subject to provisions of the Code, ERISA and COBRA.
Employer Status. In order to qualify for favorable tax treatment under the Code, employee benefit plans must be
established and maintained by an employer for the exclusive benefit of its employees. Generally, an entity is an “employer” of
individuals for federal employment tax purposes if an employment relationship exists between the entity and the individuals
under the common law test of employment. In addition, the officers of a corporation are deemed to be employees of that
corporation for federal employment tax purposes. The common law test of employment, as applied by the Internal Revenue
Service (“IRS”), involves an examination of approximately 20 factors to ascertain whether an employment relationship exists
between a worker and a purported employer. Generally, the test is applied to determine whether an individual is an independent
contractor or an employee for federal employment tax purposes and not to determine whether each of two or more companies is
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