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“Bona Fide” Fringe Benefits Fringe Benefit Requirements
- A contractor may discharge his/her obligation to provide SCA fringe benefits by paying the specified fringe benefit contributions to a trustee or third person pursuant to a bona fide fund, plan, or trust on behalf of covered employees. Examples are life or health insurance and pension or retirement plans. 29 C.F.R. §§ 4.170 and 4.171.
- To be considered a "bona fide" fringe benefit for purposes of the SCA, a fringe benefit plan, fund, or program must constitute a legally enforceable obligation which meets the following criteria. 29 C.F.R. § 4.171(a).
- The fringe benefit plan, fund, or program must be specified in writing and must be communicated in writing to the affected employees.
- The primary purpose of the plan must be to provide systematically for the payment of benefits to employees on account of death, disability, advanced age, retirement, illness, medical expenses, hospitalization, supplemental unemployment benefits, and the like.
- The plan must contain a definite formula for determining the amount to be contributed by the contractor and a definite formula for determining the benefits for each of the employees participating in the plan.
- Contributions must be made pursuant to the terms of such plan, fund, or program. Any contributions made by employees must be voluntary, and if such contributions are made through payroll deductions, such deductions must be made in accordance with 29 C.F.R. § 4.168. (No contribution towards fringe benefits made by the employees themselves or provided from monies deducted from their wages may be included or used by an employer in satisfying any part of any SCA fringe benefit obligation.)
- Generally, the contractor's contributions must be paid irrevocably to a trustee or third person, no less often than quarterly, pursuant to an insurance agreement, trust or other funded arrangement (except as indicated below with regard to certain "unfunded" fringe benefit plans).
- Unfunded fringe benefit plans:
With the exception of fringe benefit plans to provide vacations and holidays, unfunded "self-insured" plans under which a contractor typically pays insurance claims out of pocket to cover fringe benefit obligations are normally not considered "bona fide" plans or equivalent benefits for purposes of the SCA. 29 C.F.R. § 4.171(b). A contractor must request approval by the WHD Administrator for an unfunded self-insured plan. 29 C.F.R. § 4.171(b)(2).
- The following are not "bona fide" fringe benefits (nor can they be considered equivalent benefits for SCA purposes):
- Benefit plans or trusts which are disapproved by the Internal Revenue Service as not satisfying the requirements of the Internal Revenue Code or which do not meet the requirements of the Employee Retirement Income Security Act of 1974. 29 C.F.R. § 4.171(a)(5).
- Any benefit required by any other federal law or by any State or local law, such as unemployment compensation, workers' compensation, or social security. 29 C.F.R. § 4.171(c).
- Board, lodging or other facilities for which the cost or value, determined in accordance with regulations under the FLSA contained in 29 C.F.R. Part 531 (though they may be creditable toward the payment of monetary wages specified under the SCA). 29 C.F.R. §§ 4.167 and 4.171(d).
- Facilities primarily for the benefit or convenience of the contractor or the cost of which is properly a business expense of the contractor, such as relocation expenses, travel and transportation expenses incident to employment; incentive or suggestion awards, recruitment bonuses; tools and other materials and services incidental to the employer's performance of the contract and the carrying on of his business; and the cost of furnishing, laundering, and maintaining uniforms and/or related apparel or equipment where employees are required by the contractor, the SCA contract, by law, or by the nature of the work, to wear such items. 29 C.F.R. §§ 4.168 and 4.171(e).
- Contributions by contractors for such items as social functions or parties for employees, flowers, cards, or gifts on employee birthdays, anniversaries, etc. (sunshine funds), employee rest or recreation rooms, paid coffee breaks, magazine subscriptions, and professional association or club dues.
- 29 C.F.R. § 4.171(f). Fringe benefits and overtime pay:
- CWHSSA requires that on contracts to which it applies, any laborer or mechanic, including any guard or watchman, who performs over 40 hours of contract work in a workweek must be compensated "at a rate not less than one and one-half times the basic rate of pay for all hours worked in excess of 40 hours in the workweek". The basic rate of pay excludes "bona fide" fringe benefits and cash equivalent payments. 29 C.F.R. § 4.180.
- 29 C.F.R. § 778.215 and 29 C.F.R. §§ 4.177(e) and 4.182 discuss the parallel exclusion of fringe benefits from the "regular rate" for overtime purposes under the FLSA.
Consulting Services We Provide
- Review public works preconstruction contracts
- Monitor DIR contractor/subcontractor certified payrolls
- Audit labor classification for each worker employed
- Review DIR pre-DAS 140/142 submissions
- Review CAC training fund contributions form CAC-2
- Review DIR Fringe Benefits Statement PW-26
- Monitor DIR wage determinations
- Audit fringe benefits allowances
- Review DIR holiday payment requirements
- Audit DIR travel & subsistence requirements
- Caltrans Labor Compliance
- County of Sacramento Labor Compliance
- City of Los Angeles Labor Compliance
- Los Angeles Unified School District Labor Compliance
- Federal Davis-Bacon Project Monitoring
- Federal DBE Implementation & Review
- Federal FAA AIP Goal Setting
- DIR & Davis-Bacon Training
- DIR Civil Wage Penalty Review
- Local-Hire Review (e.g., San Francisco)
- Skilled and Trained Workforce
Give us a call to discuss your labor compliance requirements.
This email is intended for general information purposes only and should not be construed as legal advice
or legal opinions on any specific facts or circumstances.