Currently, 32 states have prevailing wage type laws and regulations affecting companies that contract directly with the state or local governments for construction or service type contracts. In states that designate only a prevailing wage rate (and not a separate fringe benefits rate), contractors are commonly allowed to take credit for bona fide fringe benefit payments and reduce the amount paid towards wages.
Some states’ laws closely mirror the Davis-Bacon Act and Service Contract Act. However, many states have more restrictive laws (especially as they pertain to fringe benefit requirements). In our examination of state prevailing wage laws, we found important nuances in how states define bona fide benefits, grant or limit credit for benefit programs, and prohibit certain types of common bona fide benefits (along with other very unusual rules).
The two examples below show some of the more unusual rules found in states.
Massachusetts Prevailing Wage Law Example:
The Massachusetts prevailing wage law (M.G.L. c.149, §§ 6701 et seq.) permits contributions to bona fide plans that provide health & welfare, pension and supplemental unemployment. However such bona fide plans may not provide vacation time, sick time or training funds, which are extremely common bona fide benefits. The Massachusetts prevailing wage law is inconsistent with what is often contained in some current collective bargaining agreements.
Connecticut Prevailing Wage Law Example:
Another example is a highly unusual rule in Connecticut (CT. Public Act 14-44) where the trustee of an employee welfare benefit plan cannot be subject to supervision by the Banking Commissioner of Connecticut or any other state, the Comptroller of the Currency of the United States or the Board of Governors of the Federal Reserve System. In other words, in Connecticut the trustee of employee welfare benefit plans cannot be a federal or state chartered bank or trust company! It makes you wonder: Who would the state of Connecticut prefer as the alternative?
As you can see, you cannot always use logic and common sense to navigate the law. Contractors are strongly encouraged to consult with their advisors if they have any doubt about the rules in the states in which they work.
If you have additional questions please do not hesitate to contact us or download our whitepapers – “Harnessing the Power of Supplemental Unemployment Benefit Plans” and “Working the Fringe.”
Please also view our short animated video, to see how constructing a bona fide fringe benefit plan, can move prevailing wage dollars out of payroll and reduce associated costs. Increase profits. Submit more competitive bids. Build employee loyalty.
How we can help
DirectAdvisors, established in 2001 and located in Albany, New York 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, Service Contract Act and state prevailing wage regulations. Our clients are located throughout the United States and range in size from 10 to 3,000 employees.
In 2015, our construction company clients will contribute tens of millions of dollars of prevailing wage fringe benefit contributions to The DirectAdvisors Trust (health & welfare benefits) and retirement plans managed by our team.
Our solutions are free from any conflict of interest as we do not sell any financial or insurance products. We work with existing agents, brokers and insurance companies.
NOTE: The views expressed in this blog are matters of opinion expressed by DR Pension Services, LLC and DR Advisory Services LLC (d/b/a DirectAdvisors) and do not constitute legal or other advice upon which the reader is entitled to rely.