Construction companies as well as other government contractors subject to prevailing wage laws can satisfy fringe benefit requirements by making irrevocable contributions to specialized benefit funds on behalf of covered workers.
Funded plans such as these (29 C.F.R. §§ 5.26—5.27) are those where the contractor’s fringe benefit contributions are made irrevocably to an independent trustee or third party pursuant to a bona fide fringe benefit fund, plan or program on a regular basis (at least quarterly). These contributions can be credited towards meeting the prevailing fringe benefit requirement without prior United States Department of Labor approval.
Here are three primary reasons a funded plan or trust can be advantageous:
- More Competitive Bidding / Lower Costs
- Contributions for fringe benefits are not subject to payroll-based taxes and premiums such as FICA, workers compensation, or liability insurance premiums
- Contributions are deductible in the year they are made to the trust, not when the actual benefit is paid
- Savings on overtime pay as the Davis-Bacon Act, Service Contractors Act and many states do not require an increase in the fringe benefit rate as they do with wages
- Compliance
- The U.S. Department of Labor specifically authorizes the use of funded fringe benefit plans under 29 C.F.R. §§ 5.26—5.27 as an acceptable method of meeting the fringe benefit requirements of the prevailing wage law
- Department of Labor inquiries, audits and investigations related to fringe benefits are often simplified requiring only proof of a plan, and timely contributions
- Attract and Retain Employees
- Employees who have comprehensive benefit plans are more likely to stay on your team
- Transparency within the benefit program builds employee trust
- Flexibility within the program helps employees design a program that is just right for them
- Funds held in trust can fund benefits during seasonal layoffs
How We Can Help
Direct Advisors, LLC, established in 2001 and located in the Albany, New York area, provides bona fide benefit plan consulting and third-party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act and state prevailing wage regulations. Our clients are located throughout the United States.