Reference
Plain-language glossary: PEO, tax, and coverage terms
Plain definitions for the terms used across this site, in one place. Each one is written to stand on its own, so you can land here, get the meaning, and move on. Where a term has tax consequences for you, the definition points you to your CPA, because the rules turn on your specific situation.
01
PEO and structure terms
- PEO (professional employer organization)
- A company that becomes the administrative employer of record for your staff, so it runs payroll, files the payroll taxes, sponsors the benefits, and carries workers' compensation coverage, while you keep hiring, managing, and running the business. Pooling many small businesses lets it offer large-group economics. See why a PEO.
- Co-employment
- The shared arrangement at the center of a PEO. You stay the employer who hires, directs the work, and sets pay; the PEO becomes the administrative employer for payroll, taxes, and benefits only. Your business stays yours. The precise split of duties is set in the service agreement.
- Employer of record
- The entity that formally carries the employer-side responsibilities for payroll and benefits. Under a PEO arrangement, the PEO is the administrative employer of record, which is what lets your team join its large group.
- Worksite employee
- A person who works at your business while their payroll and benefits run through the PEO's structure. The term simply names that shared arrangement from the employee's side.
- Group health plan
- A health plan offered to a group of people through an employer or a sponsoring organization, rather than bought one person at a time. Group plans are generally priced across the whole pool, which is why large groups can offer terms an individual cannot get alone.
- National Tier 1 PPO
- The category label this site uses for the top-tier group health plan available through our PEO partner. The specific underwriter and the plan documents are shown on the coverage page; the tier prices are on the pricing page.
- Flat fee
- The PEO's administrative fee for the structure: a set amount per person per month that holds steady when you add a hire or give a raise, so it does not climb with your payroll. You pay it to the PEO. It is different from a percentage-of-payroll arrangement, which costs more as you grow. See pricing.
- Referral broker
- What USA OPS is. We qualify owners, run the analysis, and connect those who fit with our PEO partner.
- Workers' compensation coverage
- Coverage that pays for work-related injuries and illnesses. Through a PEO, it is carried within the structure rather than arranged separately by the small employer.
02
Coverage terms
- Premium
- The set amount paid each month to have a health plan, separate from what you pay when you actually use care.
- Deductible
- The amount you pay out of pocket for covered care each year before the plan begins paying its share.
- Network
- The doctors, hospitals, and facilities a plan has agreements with. Care inside the network costs you less than care outside it.
- PPO
- A plan type built around a broad network that lets you see specialists without a referral and use providers outside the network at a higher cost. It trades a higher price for more freedom of choice.
- ICHRA, QSEHRA, and HRA
- Arrangements an employer sets up to reimburse eligible employees for coverage they buy in the individual market. They can fit a company's W-2 staff, but a more-than-2-percent S-corp owner is generally not an eligible employee for them, so they usually do not solve the owner's own coverage. See coverage for S-corp owners, and confirm your situation with your CPA.
- COBRA
- The right to keep your former employer's group plan for a limited time after a job ends, generally up to about 18 months, by paying the full premium plus an administrative charge. It works as a short-term bridge while you arrange something more affordable. See coverage after COBRA.
- Subsidy cliff (400% of the federal poverty level)
- The income line above which premium help in the individual market can phase out, so earning a bit more can sharply raise what you pay for coverage. It matters most to higher-earning solo owners and the pre-Medicare group. See the 2026 cost increase.
- Pre-Medicare
- The years, roughly age 50 to 64, before Medicare eligibility, when individual-market coverage is often at its most expensive. A common reason owners look at a group plan.
03
Tax terms
- Sole proprietor
- The default for a one-owner business with no separate entity: the business pays no separate income tax, and all profit flows to your personal return, with self-employment tax on the full amount.
- LLC (limited liability company)
- A legal entity formed with your state that gives liability protection and a business identity. By default a single-owner LLC is taxed as a sole proprietorship; it can elect to be taxed as an S-corp. See S-corp vs LLC.
- S-corp (S-corporation election)
- A federal tax status you elect for a business you already run. It splits your profit into a reasonable salary, where payroll tax applies, and a distribution, where self-employment tax does not, which can lower your tax once profit is high enough to clear the added cost.
- 1099 income
- Income paid to you without tax withheld, typically as an independent contractor. You owe income tax and self-employment tax on the profit yourself, usually through quarterly estimated payments. See the 1099 explainer.
- Self-employment tax
- The tax covering both the employer and the employee share of Social Security and Medicare on your business profit, because you are both. A regular job splits that bill; on your own you owe both halves, with a deduction allowed for the employer half.
- Reasonable salary
- The wage you would have to pay someone else to do the work you do, used to set an S-corp owner's salary. It must be defensible for the role, hours, and market; setting it artificially low to avoid payroll tax is an audit risk. Your CPA sets it.
- Distribution
- The share of an S-corp's profit paid to the owner beyond their salary. It is not wage income, so self-employment and payroll taxes do not apply to it, which is where the S-corp saving comes from.
Last reviewed: June 2026.
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