The more you know as a federal contractor about U.S. government contract fringe benefit obligations, the more contracts you will win and improve the overall status of your company. Here are the two federal acts that are most prevalent for the contractor to understand: SCA & DBA.
The McNamara O'Hara Service Contract Act (SCA) requires all contractors and subcontractors performing work on federal or District of Columbia service contracts in excess of $2,500 to pay their service oriented employees no less than the prevailing wage rates found in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement and to also furnish fringe benefits. Safety and health standards also apply to such contracts. Keep in mind the Fair Labor Standards Act (FLSA) minimum wage increased to $7.25, 24 July 2009. This increase will be reflected in all SCA and DBA wage determinations as of that date. As of June 1, 2009 the SCA health and welfare (fringe benefit) became $3.35.
The Davis Bacon Act (DBA) requires all contractors and subcontractors performing work on federal or District of Columbia construction contracts in excess of $2,000 to pay their laborers and mechanics not less than the prevailing wage rates and fringe benefits for corresponding classes of laborers and mechanics employed on similar projects in the area. The prevailing wage rates and fringe benefits (generally per hour) are determined by the Depart of Labor (DOL) for covered contracts. Unlike SCA, the fringe benefit amount is varied per occupation and area.
Issues.... Many federal SCA or DBA contractors pay the fringe benefit in cash, do not include a fringe benefit plan in their bids or do not have the best plan and administration possible for their company. Regardless of the situation, it is not productive.
1. Paying the fringe benefit in cash negates a great opportunity to increase your bottom line by reducing payroll costs and your tax burden. Consider if you take the amount of the fringe benefit or a portion, this amount is not subject to typical payroll taxes:
' Federal Insurance Contributions Act (FICA)
' Federal Unemployment Tax Act (FUTA)
' State Unemployment Tax Authority (SUTA)
' Workers Compensation Insurance
Just these typical payroll taxes normally exceed 25% tax on the fringe paid! The savings can be astronomical.
2. New bids with a fringe benefit plan included puts you in a much better position than a contractor showing no plan.
3. Existing plans need constant review for compliance and for competitive fees and provider rates.
What are your best options? The best option is to have a Full-Service 3rd Party Administrator take care of your fringe benefit plan. A 3rd Party Administrator should provide the following:
' Custom Health & Welfare Benefit Design (Medical, Dental, Vision, Life Insurance, & Retirement Plans)
' Eligibility & Claims Administration
' Membership Enrollment & Presentation
' Government Regulatory Compliance
' Trust Management
' Cost Management
' Support from in-house team of compliance experts
' Bilingual customer support (CONUS - Spanish is important)
If you do not have a full service 3rd Party Administrator aligned with you as a business partner, look into it now for the benefit and welfare of your company. If you are not satisfied in anyway with your current plan or service, shop around, there are but a few companies that specialize in this industry. Make a comparison; it's healthy for your company and for the industry!
About The Author
Robert A. Quadra has helped many companies optimize staffing, employee retention and benefit administration. He is currently consulting and focused on fringe benefit brokering. For more info: http://www.fringebenefitplans.us
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