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DOL Guidance on Counting Administrative Fees toward the Fringe

April 22, 2011 Written by: Written by Mike Rogers, Chief Compliance Officer

Recently a question came into our office regarding counting administrative or consultative fees toward the fringe portion of the prevailing wage.  The U.S. Department of Labor states that costs incurred by an SCA or Davis Bacon contractor’s insurance carrier in its administration and delivery of benefits to employees can be credited toward the fringe. However the letter which delivers this guidance goes on to state that these costs are generally included in the carrier’s charge to provide coverage to the employees. In other words, any costs for administration and delivery of benefits are generally wrapped into the premium or administrative costs for prevailing wage benefits.

Contractors who use a third party which charges consulting fees cannot count this consulting fee toward the fringe portion of the prevailing wage.  The salary, or a portion of the salary, of a person on the contractor’s staff who is responsible for recordkeeping and remittance of contributions to a prevailing wage plan, is also not allowed to be counted toward the fringe portion of the prevailing wage.

Regarding this, the letter states: “The cost of administrative services of a third party for the convenience of the contractor, e.g., flexible benefits record keeping costs associated with payroll administration, and expenses incurred in the research and development of new insurance plans would be considered business expenses of the contractor. Therefore, the cost of these services cannot be credited toward the contractor’s fringe benefit obligations under the SCA.”  This holds true for Davis Bacon contractors, as well.

Do you have a compliance question? Email it to us and we’ll address it in a future blog.