Fringe Benefit Requirements - Health And Welfare Benefits

  1. The health and welfare fringe benefit requirement for covered service employees is indicated in the applicable contract wage determination.
  2. There are three types of health and welfare fringe benefit requirements under the SCA:
    1. "Fixed cost" per employee health and welfare benefit requirement - Where the SCA wage determination states this type of fringe benefit, the health and welfare rate is required to be paid for each individual employee and the benefit is computed on the basis of "all hours paid for" up to 40 per week and 2080 per year. 29 C.F.R. § 4.175(a).
    2. "Average cost" health and welfare fringe benefit - Where the SCA wage determination states this type of fringe benefit, the employer contribution is required to average at least the health and welfare rate stated in the SCA wage determination ($3.71 per hour as of June 17, 2012) computed on the basis of all hours worked - including overtime hours - by service employees employed on the contract (or portion of the contract to which the wage determination applies). 29 C.F.R. § 4.175(b).
    3. Pursuant to section 4(c) of the SCA, collectively bargained fringe benefits are required to be paid by a successor contractor under a contract to furnish substantially the same services as a predecessor contractor. 29 C.F.R. § 4.53.
  3. A single nationwide health and welfare rate method has been established for determining the health and welfare fringe benefit requirement incorporated in SCA wage determinations. Since June 1, 1997, adjustments to the single rate for the health and welfare fringe benefits listed on prevailing wage determinations are made annually. 29 C.F.R. § 4.52; All Agency Memorandum No. 188 (May 22, 1997).

"Fixed Cost" Per Employee Health and Welfare Fringe Benefit

  1. Most SCA wage determinations require health and welfare benefits to be paid on a per hour per employee basis. Such wage determinations state the health and welfare fringe benefit requirement as a simple rate. Annual adjustments are based on new data. For example, on June 17, 2012, the amount specified for upcoming contracts was raised from $3.59 to $3.71 per hour. Thus, wage determinations issued on or about June 17, 2012, listed the "fixed cost" health and welfare fringe benefit amount as "$3.71 an hour, $148.40 a week, or $643.07 a month." See 29 C.F.R. § 4.175(a).
  2. This method requires health and welfare benefits in terms of a fixed contribution per hour on behalf of each service employee working on the contract. Under this type of wage determination, the specified health and welfare benefit is due each service employee on the basis of "all hours paid for," including paid vacations, holidays, and sick leave, up to a maximum of 40 hours per week and 2,080 hours per year.
    1. Under this type of wage determination, the actual benefits may differ among employees, so long as the total amount paid by the contractor for fringe benefits (and/or cash equivalents) provided to each individual, on an hourly basis, totals at least the fringe benefit rate specified in the contract wage determination for the work the individual performs for all his/her paid hours up to 40 per week.
    2. The type(s) and amount of bona fide fringe benefits (if any), or cash equivalents to be provided is strictly a matter to be decided by the employer.
    3. Employees excluded from participation in a fringe benefit plan must be furnished equivalent bona fide fringe benefits or be paid a cash equivalent payment during the period that they are not eligible to participate in the plan. On the other hand, it is not required that all employees participating in a fringe benefit plan be entitled to receive benefits from the plan at all times. For example, an employee who is eligible to participate in an insurance plan may be prohibited from receiving benefits from the plan during a 30-day waiting period. Contributions made on behalf of these employees would be creditable against the contractor's fringe benefit obligations. 29 C.F.R. § 4.175(c).
    4. Example: Bi-weekly Payroll - $3.71 per hour paid up to 40 hours a week per each employee:

       

      Hours

      Paid For

      Cost of

      Fringe

      Benefits

      Cash in

      Lieu of

      Fringes

       

      Employee

       

      Total Compensation

      Libby

      80

      $180.80

      $116.00

      $296.80 (/ 80 = $3.71)

      Bill

      *100

      $160.80

      $136.00

      $296.80 (/80 = $3.71)

      Alex

      20

      0

      $74.20

      $74.20 (/20 = $3.71)

      Tim

      80

      $296.80

      0

      $296.80 (/ 80 = $3.71)

      Crystal

      60

      $200.00

      $22.60

       $222.60 (/ 60 = $3.71)


      * Note 20 hours of overtime excluded from payments.

"Average Cost" Health and Welfare Fringe Benefit

  1. In rare instances an average cost (even-numbered) wage determination applies. Such wage determinations apply only where an even-numbered wage determination applied to the preceding contract with the same agency contracts for substantially the same services at the same location.
  2. When an average cost, even-numbered, wage determination applies, the per hour health and welfare benefit is an average cost fringe benefit requirement computed on the basis of "all hours worked" by service employees on the contract.
    1. The term "all hours worked" includes overtime hours and is not limited to 40 hours per week or 2,080 hours per year for each employee; the term "all hours worked" does not include paid leave hours, such as for vacations, holidays, or sick leave. Also, it does not include unpaid leave time, such as that provided under the Family and Medical Leave Act.
    2. Under the average cost concept, the fringe benefits provided by the contractor may vary among individual service employees, and compliance is achieved when the actual cost of these benefits divided by the total hours worked by service employees in a payment period equals or exceeds the amount required by the wage determination. 29 C.F.R. § 4.175(b).
  3. The types and amounts of benefits, if any, to be provided, and the eligibility requirements for service employees to participate in a fringe benefit plan, are decided by the contractor.
  4. If the contractor's contributions average less than the amount required by the applicable wage determination during a payment period, then the contractor must make up the deficiency by providing cash equivalent payments to all service employees who worked on the contract during the payment period.
  5. Cash equivalent payments under average cost fringe benefit requirements can only be made in an amount determined to be deficient after payments have been made to the fringe benefit plans, and the payments must be made equally to all covered service employees.

Examples:

$3.71 average cost requirement - compliance through fringe benefit plan contributions only


 

 

Employer

Employee

Hours

Contributions

 

Worked

for Fringe Benefits

Libby

250

$1000

Bill

150

$ 550

Alex

250

$1000

Tim

50

0

Crystal

100

$ 418

 

800

$2,968


$2968 (total contributions)/800 (total hours) = $3.71 average

(b) $3.71 average cost requirement - compliance through fringe benefit plan contributions and cash payments:

 

 

Employer

Employee

Hours

Contributions

 

Worked

for Fringe Benefits

Libby

250

$650

Bill

150

$450

Alex

250

$650

Tim

50

0

Crystal

100

$250

 

800

$2,000

$2000 (total contributions)/800 (total hours) = $2.50 average

Libby

250 x $1.21

$302.50

Bill

150 x $1.21

$181.50

Alex

250 x $1.21

$302.50

Tim

50 x $1.21

$ 60.50

Crystal

100 x $1.21

$121.00

 

800

$968.00


Total contribution: $2,000 (fringe benefits) + $968 (cash) = $2,968

$2,968 (contributions)/800 (hours) = $3.71

Collectively Bargained Fringe Benefits

  1. Section 4(c) of the SCA provides that no contractor or subcontractor under a contract which succeeds a contract subject to the SCA, under which substantially the same services are furnished, shall pay any service employee under such contract less than the wages and fringe benefits (including accrued wages and fringe benefits and any prospective increases in wages and fringe benefits) provided for in a collective bargaining agreement (CBA) to which such service employees would have been entitled if they were employed under the predecessor contract. 29 C.F.R. § 4.1b.
  2. In almost all cases, a wage determination is issued that requires payment for fringe benefits and wage rates established by the predecessor contractor's CBA. However, because section 4(c) of the SCA is self-executing, the collectively bargained fringe benefits and wage rates apply regardless of whether such a contract wage determination was issued or incorporated in the contract. Certain administrative requirements and limitations may affect application of the predecessor contractor's negotiated wages and fringe benefits. 29 C.F.R. §§ 4.1b(b).
  3. Section 4(c) of the SCA does not require a successor to follow terms of the CBA other than the wage and fringe benefit provisions.
  4. Where section 4(c) applies, the successor contractor may discharge the obligation to furnish fringe benefits by any combination of bona fide fringe benefits and equivalent cash payments (as is the case where no predecessor's CBA is involved).
  5. As the successor is not permitted to pay less than the fringe benefits (and wages) to which employees would have been entitled under the predecessor contractor's CBA, any interpretation of the wage and fringe benefit provisions of the CBA, where its provisions are unclear, must be based on the intent of the parties to the CBA, provided that such interpretation is not violative of law. Thus, some principles discussed in regulations 29 C.F.R. §§ 4.170 - 4.177 regarding specific interpretations for the fringe benefit provisions of SCA prevailing wage determinations may not be applicable to wage determinations issued pursuant to section 4(c). (Similarly, some principles discussed in 29 C.F.R. § 4.167, regarding wage payments, may also not be applicable in section 4(c) successorship situations.)
  6. In 29 C.F.R. § 4.163, regulatory guidance is provided specifically concerning compensation standards, including fringe benefits, under section 4(c) of the SCA.


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