Frequently Asked Questions

We’ve assembled answers to our most-asked questions here. If you have specific questions about your company’s prevailing wage and benefit plan options, request a free assessment now.


What is annualization?

Annualization is the time frame (annual) over which contributions to benefit plans are divided in order to calculate an hourly credit toward the amount the prevailing wage schedule requires an employer to pay. Total annual contributions per employee are divided by the total annual hours that employee worked on both public and private jobs.

What time period is used for annualization?

The Department of Labor generally looks to the employer’s benefit coverage time frame, whether fiscal year, calendar year, plan year, etc. If the employer did not use a specific time frame to calculate their credit, the Department will generally use a calendar year. An employer needs to be consistent in using the same 12-month period from year to year.

How can I provide the required hourly fringe amounts listed in the wage schedule to my employee?
  • As cash in the employee’s weekly paycheck when working on a public work project; or
  • As a contribution to a bona fide benefit plan on behalf of the employee.
    • • If you choose this option but do not make the contributions on an hourly basis for all hours worked (public and private), then you must determine (annualize) the hourly cash credit the employer receives for fringe contributions. Once that credit is determined, you must make up any deficiency between the required fringe amount and the hourly credit amount on a weekly basis along with employee’s wages.
    • • If you make contributions for all hours worked (public and private), and they are at least the amount shown in the wage schedule, you’ve met the requirements of the law.
How can I determine the hourly cash credit for fringe benefits provided?

To calculate the hourly cash credit, the Department of Labor provides the following formula:

  1. Determine the actual annual contribution for bona fide fringe benefits you make for each employee.
  2. Determine the total annual hours each employee worked on both public and private jobs.
  3. Divide the actual contribution or cost (a) by the total number of hours worked (b).
  4. Once that credit is determined, you must make up any deficiency between the required fringe rate and the hourly credit amount on a weekly basis with the employee’s wages.
Does an employer receive credit for contributing to health insurance benefit plans that have waiting periods or to pension plans with extended vesting schedules?

Yes. The Department of Labor will verify that:

  1. The plan is a bona fide plan; and
  2. The employee is a plan participant; and
  3. The monies claimed as contributed on behalf of each employee have been contributed.
Does an employer have to provide a full range of benefits (pension, health insurance, dental, etc.) or can the employer provide just one or some?

The employer may choose the type and level of any particular benefit they provide, as long as the benefit is considered bona fide.

Would a cafeteria plan comply with the annualization requirement?

Yes. A true cafeteria plan, where the employer provides the total dollar value of the hourly fringe amount to the employee—and the employee has the option or vehicle to purchase his or her own benefits—is considered the same as cash.

Are there any “benefits” for which an employer is not allowed to take credit when calculating fringe benefit cost and contributions?

Yes. The following are some items that do not qualify as bona fide benefits:

  • Travel expenses such as meals and lodging
  • Use of company vehicle; or gas, toll and vehicle reimbursements
  • Meal allowances
  • Reimbursement for tools or company-provided equipment
  • Uniforms or uniform cleaning


How much information will my office staff need to provide each week or month?

Contributing fringe dollars is simple. Along with your check or wire transfer, you will need to upload data or a report that shows:

  • Employee name
  • Employee ID
  • Amount of fringe dollars
Is employee participation in the plan voluntary?

Generally, no—but it can be. The decision to make a plan mandatory or voluntary is often dependent on the contractor’s circumstances. If the contractor’s work is predominately (at least 75%) public and subject to prevailing wage regulations, it may be beneficial to make the plan mandatory. Making a plan voluntary avoids annualization issues but does not provide the same level of savings for the contractor or the employees.

There is a voluntary component to all plans because employees have the option to decline certain benefits offered within the plan (health insurance, vacation benefits, etc.), which provides more dollars for retirement benefits.

What happens to the fringe dollars contributed for employees that decline the benefits offered within the plan?

Their fringe dollars fund their retirement benefits.

What happens when an employee terminates their employment?

In most cases, the remaining fringe dollars in the employee’s benefit account will be contributed to their retirement plan—unless the employee elects to use those dollars to pay for medical benefits during a layoff.

What happens to excess balances that accumulate at the end of the year?

Balances remaining in a participant’s benefit accounts are rolled into their retirement plan account. Partial balances can also be carried over to the next plan year to pay for benefits during seasonal slow-downs.

Can workers use their benefit dollars to pay insurance premiums during a layoff?

Yes. The balance available in the employee’s benefit account may be used for insurance premiums.

How does the paid time-off benefit work?

You may pay time-off benefits through The DirectAdvisors Trust provided that your company maintains a defined, non-discriminatory paid time-off policy. The check is paid directly to the employee and is exempt from unemployment taxes and workers compensation taxes. However, the employer must continue to pay its portion of the FICA.

How does the supplemental unemployment benefit work?

If offered, supplemental unemployment benefits are available for employees who have an involuntary separation from employment (whether temporary or permanent) resulting directly from a seasonal layoff, force reduction, discontinuance of a plant or operation, or other similar conditions. Benefits receive the same tax treatment as state unemployment, not subject to FICA.

What are the administrative charges for The DirectAdvisors Trust?

Our fees are by far the most competitive and straightforward in the industry. We charge a one-time set-up fee and a flat percentage of the fringe dollars deposited. The fee is payable from the participant’s account and not charged to the employer. The tax savings to the employee, combined with the interested credited to his or her account, offset our administrative fees.

What types of benefits can be paid through The DirectAdvisorsTrust?

We accommodate both insured benefits and other benefits. Insured benefits include medical, dental, vision, group life and disability. Other benefits include paid time off, health savings accounts (HSA), supplemental unemployment and apprentice training benefits. Any funds remaining after providing these go to the employees’ retirement plan accounts.

Can you work with my existing benefits provider/broker?

Absolutely. We administer the fund, but the actual insurance products are your choice.

Do you sell insurance? Are clients required to buy insurance from a specific broker or provider?

No. We neither sell insurance nor require you to use a specific broker. We can administer and fund any insurance (medical, dental, vision, group life and disability). We do not want to disturb any existing relationships you may have in place with benefit brokers.


How can employees monitor fringes contributed and benefits paid on their behalf?

Employees have access to their account information online or by calling our toll-free customer service number. They also receive a statement each quarter that documents all account activity.

How can my office staff monitor fringes contributed and benefits paid?

All activity is contained within our database and is available online in real time. You will also receive a monthly statement that documents all account activity. We are available to answer your questions any time.

How can employees monitor and reallocate assets in their retirement plan accounts?

Employers who establish a retirement plan with us gain a full range of features, including participant online account access, daily valuation of account balances and the ability to make changes to investment allocations at any time.

How is the plan communicated to the employees?

We excel in employee communications, which are critical to successful plan implementation. We meet with your workers—on job sites and at times you and your employees find convenient—to provide simple reference materials and demonstrate online account access. We always have time to answer questions!

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