Site Visit: Advocacy visits Iowa-based Company Focusing on Helping Small Businesses Comply with Regulations

By Janis Reyes, Assistant Chief Counsel

Advocacy has visited over 20 states hosting Regional Regulatory Reform Roundtables to hear directly from small businesses about what federal regulations are burdensome to them. Small business owners have often commented that they do not have human resource staff to understand or comply with complex employment laws. Advocacy attorneys recently visited with Focus OneSource in Iowa, a company created to manage human resources administration and regulatory compliance so that small businesses can focus on their growing their business.

Michael Teachout, Vice President of Focus OneSource, explained that Focus One Source is a Professional Employer Organization (PEO). A PEO is a company that handles all of the non-revenue producing functions for small to medium-sized businesses such as hiring, payroll, benefits, and regulatory compliance. Focus One Source becomes a co-employer for these small businesses, and this PEO negotiates better rates for benefits such as health care because they represent over 80 businesses and over 2000 employees. According to the National Association of Professional Employer Organizations, there are between 780 and 980 PEOs currently operating in the United States, and over 2.7 to 3.4 million employees who benefit from PEO services.

At Advocacy’s roundtables in Des Moines and Dubuque, many small businesses expressed concern with the Affordable Care Act (ACA) and the high prices of health care in Iowa. This state only has one carrier selling individual health insurance policies in the health care exchange in 2018. Focus OneSource is able to harness its purchasing power to obtain health care rates of 18 to 34 percent less than the market rate due to its larger pool of employees. Many small businesses at the roundtable are also considering new non-ACA health coverage offered by the Iowa Farm Bureau next year that was made possible by an April 2018 Iowa law. Teachout is seeking clarification about a new Department of Labor final rule that will allow small businesses to buy into similar group association health plans next year.

Teachout was also concerned about the impact of the recent tax reform law, which creates a new income tax deduction for certain types of businesses owners in an amount up to 20 percent of the taxpayers’ taxable income. Sole proprietorships, partnerships, LLCs and S corporations are “pass-through entities” for federal income tax purposes. These entities are not subject to income tax; the business owners are taxed directly for this income. Teachout is concerned that small businesses in a PEO relationship with companies like Focus OneSource might jeopardize this tax deduction, as the deduction is based on the payment of wages. In this employment relationship, the PEO pays the W-2 wages. Teachout recommends that the IRS clarify this issue in its forthcoming regulations.

Advocacy was interested to learn about this new type of employment relationship and the regulatory compliance assistance these companies can provide to small businesses. We will make sure to bring back their unique regulatory concerns back to DC.

Advocacy was in Iowa for Regional Regulatory Reform Roundtables July 17- 19th.

Can’t get to a roundtable near you? Fill out this form and tell us about your federal regulatory burdens. We will pass this information on to the appropriate agency and use it in the planning of upcoming Regional Regulatory Reform Roundtables. 

Janis Reyes is an Assistant Chief Counsel for Advocacy whose portfolio includes labor and employment regulations. Reyes can be reached at



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