Glossary · Payroll & taxes
Wage Base Reset (Mid-Year PEO Transition)
The phenomenon where employees can be re-subjected to Social Security or SUI taxable wage bases when an employer transitions PEOs mid-year.
Because Social Security and SUI wage bases are tied to a single FEIN, transitioning a workforce to a new FEIN mid-year can cause employees who already crossed the wage base to start contributing again under the new account.
CPEOs receive statutory protection from FICA wage-base reset. SUI varies by state — a few states recognize successor-employer treatment; many do not. This is a material — and often overlooked — cost in PEO transitions.
Related terms
- CPEO (Certified PEO)A PEO certified by the IRS under the Small Business Efficiency Act, providing client businesses explicit federal employment-tax liability assurance.
- SUI / SUTA (State Unemployment Insurance)State payroll tax that funds unemployment benefits. Rates are experience-rated based on an employer's claims history.
- FICA (Federal Insurance Contributions Act)Federal payroll tax funding Social Security (6.2% each on employer and employee, up to the wage base) and Medicare (1.45% each, no wage cap).
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