All fringe benefit plans fall into two categories, “funded” (29 C.F.R. §§ 5.26-5.27) or “unfunded” (29 C.F.R. § 5.28).

Funded plans are those where the contractor’s fringe benefit contributions are made irrevocably (funds cannot revert back to the contractor for any reason) to a trustee or third party (independent) pursuant to a bona fide fringe benefit fund, plan or program (in writing) 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. Examples of payments by contractors that can be credited include:

Contractor makes weekly contributions to a health & welfare plan or trust for the provision of benefits (health insurance, vacation pay, apprentice training, supplemental unemployment, etc.)

Contractor makes quarterly contributions to a retirement plan trust

Contractor pays monthly health insurance premiums to an insurance company

Unfunded plans or programs where the contractor funds certain benefits from the company’s general assets (rather than by payments to a trustee or third party) are referred to as an unfunded plan. Vacation and holiday benefits are the most common types of unfunded plans. A contractor’s reasonably anticipated costs in providing bona fide fringe benefits under such a plan may be creditable towards meeting the DBA prevailing wage obligations if certain requirements are met, including:

It can reasonably be anticipated to provide bona fide benefits as described in the Davis Bacon Act

It represents a commitment that can be legally enforced

It is carried out under a financially responsible plan or program; and

The plan or program has been communicated in writing to the affected employees