Inside a Real PEO Exit: How We Found $121,000 in Annual Savings for a 62-Employee Tech Company

We talk a lot about PEO exit savings in general terms. Companies save $90K-$100K+. Admin fees are too high. Benefits are marked up. You've heard it.

But generalities don't close deals. Numbers do. So here's something we don't usually share: a complete, line-by-line walkthrough of an actual PEO exit analysis we recently completed. The company details have been anonymized, but every dollar figure is real. Every invoice line item is real. Every market quote is real.

This is what it actually looks like when you crack open a PEO's bundled pricing and compare it to the open market.

The Company

A 62-employee technology company based in the Northeast with operations in three states (Massachusetts, Connecticut, and California). They'd been with their PEO since early 2024 on a C-Corp structure. Payroll was running semi-monthly. Benefits renewal date: July 1, 2026.

The HR generalist managed day-to-day operations. The CEO made the financial decisions. Neither had run a market comparison since joining the PEO. They came to us because costs kept climbing and they wanted to see the numbers.

Step 1: Pulling Apart the Invoices

We collected six semi-monthly invoices covering three months (November 2025 through January 2026). Every PEO invoice looks simple at first glance. A list of line items, a total, done. But when you lay six of them side by side and start calculating, patterns emerge.

Here's what the annualized cost structure looked like from the actual invoices:

Invoice Line Item	6-Period Total	Annualized	% of Total
Gross Wages	$2,321,047	$9,284,188	pass-through
SS/Medicare	$140,645	$562,579	pass-through
FUTA	$3,762	$15,046	pass-through
SUTA	$21,171	$84,685	pass-through
Medical	$204,091	$816,364	73.5%
Dental	$13,734	$54,938	4.9%
Vision	$1,900	$7,601	0.7%
Life Insurance	$4,053	$16,211	1.5%
LTD Insurance	$4,532	$18,129	1.6%
Admin Fee	$17,760	$71,040	6.4%
Workers' Comp	$8,286	$33,145	3.0%
HSA Contributions	$8,750	$35,000	pass-through
401(k)	$28,061	$112,242	pass-through
Other (non-cash, wire fees)	($11,652)	($46,650)	adjustments
TOTAL INVOICE	$2,772,957	$11,091,826

Source: Six actual PEO invoices, annualized (monthly average x 12). Pass-through items exist regardless of PEO status.

The first thing to notice: the vast majority of that $11M invoice is pass-through (wages, payroll taxes, 401k contributions, HSA contributions). Those costs exist whether you're in a PEO or not.

The controllable costs total roughly $1,057,000 per year: medical ($816K), dental ($55K), vision ($8K), life ($16K), LTD ($18K), admin fee ($71K), workers' comp ($33K), and HSA pass-through ($35K). That's the number we're trying to beat.

Step 2: The First Red Flag

Here's where things got interesting. The company also had a benefit rate table from their PEO showing the monthly premium per plan per tier. Standard stuff. We multiplied the rate table rates by the enrollment count to get an expected annual medical cost.

The rate table math said medical should cost $915,162 per year.

The invoices said medical was running at $816,364 per year.

Step 3: The Contract Deep Dive

Before running any market comparison, we read the PEO's Client Service Agreement cover to cover. Here's what we found that mattered:

• Non-renewal notice deadline: May 1, 2026 (for a June 30 term end). Miss this by one day and you're locked in for another full year.
• Early termination fee: If you leave mid-term without proper notice, you owe the remaining outsourcing service fees for the rest of the current term. That's potentially $35,000+ in penalties.
• COBRA obligations: If the company doesn't secure replacement group health insurance upon exit, they owe the PEO $400/month per former employee maintaining COBRA coverage.
• Admin fee schedule: $108/employee/month for 51-75 employees. But the invoiced admin fee averaged $71,040/year, which is $95.48 PEPM. Lower than the contract rate because headcount fluctuated per pay period.
• Broker commissions: The PEO's affiliated broker was receiving 5.26% on medical (Cigna) and 10% on dental/vision/life/LTD (Guardian), paid by the carriers. This is separate from the admin fee.

Step 4: Going to Market

We ran a full RFP across every benefit line. Here's what came back.

Medical: Only One Winner

We quoted three carriers against the PEO's current Cigna rates:

Carrier	Annual Premium	vs. PEO (Invoice)	vs. PEO (Rated)
Current PEO (invoiced)	$816,364	Baseline
Current PEO (rated)	$915,162		Baseline
BCBS MA (Recommended)	$758,021	-$58,343 (-7.1%)	-$157,141 (-17.2%)
Harvard Pilgrim	$927,805	+$111,441	+$12,643
Cigna Direct	$977,947	+$161,583	+$62,785

Two of three carriers were more expensive than the PEO. Only BCBS MA beat it. And Cigna Direct, the company's current carrier accessed outside the PEO, was actually $62,000 to $162,000 MORE expensive. That tells you the PEO's pooled rate wasn't terrible on medical. But BCBS still found a way to beat it by structuring a two-plan strategy (Blue Care Elect Saver + Advantage Blue Preferred Saver) that better fit the employee demographic.

Cigna offered a $20,000 transition credit and $5,000 wellness fund to keep the business. Even with $25,000 in credits, they were still more expensive. We noted it and moved on.

Ancillary Lines: Mixed Results

Benefit Line	Current PEO (Annual)	Best Market Quote	Best Carrier	Savings
Dental	$54,938	$40,040	Cigna	$14,898
Vision	$7,601	$4,964	Guardian	$2,637
Life/AD&D	$16,211	$14,650	Reliance Matrix	$1,561
LTD	$18,129	$11,234	SunLife	$6,895
Ancillary Total	$96,879	$70,888		$25,991

We quoted Guardian, Cigna, Standard, MetLife, Reliance Matrix, and SunLife across all ancillary lines. Also asked Mutual of Omaha, Principal, Ameritas, Delta Dental, Hartford, Lincoln, and UNUM. Seven of those came back either uncompetitive or declined to quote. That's normal. You cast a wide net and let the math sort it out.

The Costs That Didn't Exist Before

This is the part most people miss when they think about PEO exits. Inside the PEO, certain costs are bundled invisibly into the admin fee or payroll tax lines. When you go standalone, they become separate, visible line items.

New Standalone Cost	Annual	Best Carrier
Short Term Disability	$4,754	SunLife
Massachusetts Paid Medical/Family Leave	$10,881	MetLife
HSA Administration	$3,199	Cigna/HSA Bank
Total New Costs	$18,834

These aren't new obligations. The company was paying for them inside the PEO. They just weren't visible as separate line items on the invoice. Now they are. And they need to be subtracted from the gross savings to get an honest net number.

Step 5: The Final Math

Here's how it breaks down:

Savings Component	Annual Impact
Medical (BCBS MA vs. PEO invoiced cost)	+$58,343
Admin fee eliminated, replaced by HRIS (~$20 PEPM est.)	+$56,160
Ancillary lines (dental, vision, life, LTD)	+$25,991
New standalone costs (STD, MA PFL, HSA admin)	-$18,834
NET ANNUAL SAVINGS	$121,660

That's the conservative number using the invoice baseline for medical. If we use the rated baseline instead (which is what the PEO's benefit rate table says the company should be paying), the medical savings jump to $157,141 and the total climbs to roughly $220,000.

We presented both numbers to the CEO. The conservative figure as the primary case. The higher figure as realistic upside. We recommended he plan around the $121K and treat anything above it as a bonus.

What Surprised Us

A few things from this analysis that challenged our own assumptions:

The PEO's medical rate wasn't bad. Two of three carriers came back more expensive. The PEO's pooled Cigna rate was actually competitive. The savings came from one carrier (BCBS MA) that found a structural advantage through plan design, not because the PEO was dramatically overcharging on medical.

The admin fee was the second biggest savings lever, not the first. We often lead with "eliminate the admin fee" as the headline savings story. In this case, the admin fee elimination ($56K net after HRIS cost) was nearly as large as the medical savings ($58K). Both mattered.

The "invisible" costs were meaningful. $18,834 in new standalone costs (STD, state disability, HSA admin) is not a rounding error. If we hadn't accounted for them, we would have overstated savings by 15%. Intellectual honesty matters when you're asking a CEO to make a six-figure decision.

The rate table vs. invoice gap was the biggest analytical landmine. A $99K difference between two legitimate ways to measure the same company's medical costs. If we'd only used the rate table baseline, we would have told the CEO he was saving $220K. That's probably true, but we can't prove it with the same confidence. Leading with the conservative number and noting the upside is the right way to present it.

The Timeline

From first document upload to completed workbook: about 2 weeks of actual work.

• Week 1: Collected invoices, census, contract, enrollment data. Extracted and verified all numbers.
• Week 2: Built the comparison workbook, ran the carrier RFP, integrated market quotes.
• Week 3: Presented findings to the CEO with a 7-slide deck and the full Excel workbook.

The implementation timeline (if approved) is 14 weeks from decision to go-live, targeting the July 1 PEO renewal date. The critical constraint: the non-renewal notice must reach the PEO by May 1.

What This Means for Your Company

Every PEO engagement is different. Your numbers won't look exactly like these. Your PEO might be more or less competitive on medical. Your admin fee might be higher or lower. You might be in one state or ten.

But the methodology is the same every time:

1. Pull the invoices apart line by line. Don't trust the summary. Trust the math.
2. Cross-reference the rate table against the invoices. If they don't match, figure out why.
3. Read the contract. Know your deadlines, your penalties, and your obligations.
4. Go to market. Not with one carrier. With all of them. Let the numbers compete.
5. Account for new standalone costs. Be honest about what the PEO was covering that you'll now pay separately.
6. Present both baselines. Don't oversell the savings. Let the CEO decide based on the conservative number with upside noted.

If you're a 40+ employee company in a PEO and you haven't run this analysis, you're making a six-figure decision based on zero data every single year at renewal time. That's not conservative. That's just uninformed.

The analysis itself costs nothing and takes two weeks. The worst-case outcome is you confirm your PEO is a good deal and you stay with confidence. The best-case outcome is you find six figures in annual savings that go straight to your bottom line.

Either way, you'll know.