White House Issues New Executive Order on Contractor Fair Pay and Safe Workplaces

On July 31, 2014, the White House issued an Executive Order (EO) titled “Fair Pay and Safe Workplaces” that imposes many new requirements on federal contractors. The purpose of the EO is to “increase efficiency and cost savings in the work performed by parties who contract with the Federal Government by ensuring that they understand and comply with labor laws.”

This sweeping EO achieves this purpose by identifying 14 labor requirements, such as the Fair Labor Standards Act, Davis-Bacon Act, Service Contract Act, and National Labor Relations Act, that contractors must report violations and contracting officers can rely to make a responsibility determination when awarding contracts with a value greater than $500,000.

In addition to contracting officers making responsibility determinations when awarding prime contracts, prime contractors must make the same determination in regards to subcontractors when compensation exceeds $500,000.

The EO requires the General Services Administration to create a new website for contractors to report violations and requires each agency to designate a senior official who will serve as that agency’s Labor Compliance Advisor.

This new requirement applies to contracts for goods, services, and construction. The Federal Acquisition Council and the US Department of Labor are also charged with developing regulations but no implementation deadlines were provided. Developing guidance will be a lengthy and complicated process.

Measure to Fund Highway Trust Defers Contributions to Pension Plans

Before adjourning for summer break Congress passed a bill to keep the Highway Trust Fund flowing to states through next May. President Obama signed the $10.8 billion measure which provides a large percentage of the money needed to sustain and expand our roads. The fund was set to run out of money at the end of August. Though the passage of the bill did prevent the loss of thousands of jobs, the funding of the bill will adversely affect some workers and their ability to accrue pension savings.

Recognizing that financial support for the Highway Trust Fund could not come only from current federal gas taxes, which are two decades old, Congress decided to allow companies to defer required contributions to certain defined benefit pension plans. Their reasoning was that letting corporations make smaller pension contributions now will subsequently lead to an increase in corporate profits and tax revenues from those profits which will theoretically cover the cost of the payment to the Highway Trust Fund.

While Congress was trying to avoid negatively impacting workers, some critics claim Congress overlooked a bigger issue, that of encouraging companies to defer pension plan contributions, which could have an adverse effect on some employees. And since pension plan contributions will be deferred they will have to be made later — thus decreasing future corporate profits and tax revenue.

As President Obama pointed out when signing this measure, it is only temporary and not intended as a long-term solution. Congress should be expected to find ways to cover the costs of the Highway Trust Fund in the future without impacting worker’s pension plans.

Fringe Benefit Requirement for Service Contract Act Increased to $4.02

The Department of Labor has released its annual memorandum which specifies a rate increase for Service Contract Act (“SCA”) health and welfare fringe benefits. The new rate is $4.02 per hour, a 5.5% increase, and becomes effective July 22, 2014.

The new rate will be required in all invitations for bids opened, or other service contracts awarded on or after July 22, 2014. The contracting officer may adjust bids submitted using the old rates without obtaining a new wage determination before issuing the new contract. For existing service contracts, the new rate will go into effect on the anniversary date or the option renewal/modification date, depending on the terms of the contract.

The rate in Hawaii is dependent upon whether an employee is insured pursuant to the state’s mandatory health care law. Contractors operating in Hawaii should review the DOL memorandum and their applicable wage determination requirements.

President Obama Signs Executive Order Prohibiting Federal Contractors from Discriminating Against LGBT Employees

As anticipated, on July 21 President Obama signed an Executive Order (EO) banning federal contractors from discriminating against lesbian, gay, bisexual and transgender (LGBT) employees. The new EO amends two existing orders, 11246 and 11478, by adding sexual orientation and gender identity to the list of categories of protected federal contractor workers. The White House predicts that these changes will impact about 24,000 companies with federal contracts that together employ over 28 million workers – a fifth of the country’s workforce.

Obama’s new EO revises the existing 11478 by formally adding gender identity to the list of protected categories. This change will take place immediately and identifies the Equal Employment Opportunity Commission (EEOC) as being responsible for directing and furthering the implementation of the rule.

Additionally, the new EO amends 11246 by adding provisions that prohibit discrimination and require affirmative action on the basis of sexual orientation and gender identity. The US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) will be responsible for these changes and has been given 90 days from the date of the order to prepare regulations for implementation. However, preparation of these regulations will likely take longer than 90 days due to the federal regulatory process which requires public notice and the opportunity to submit comments.

At this time the new EO does not permit for any additional exemptions for religious entities beyond those which were added by President George W. Bush several years ago.

Obama supports legislation that would bar most employers, not just federal contractors, from discriminating against LGBT workers; but since Congress has not acted Obama pursued executive action to protect the portion of the US workforce over which he has some control.

Fringe Benefit Group Acquires The American Worker Plans

Fringe Benefit Group, an industry leader in the design, implementation and administration of benefits for hourly and part-time workers, today announced it has acquired The American Worker Plans, an Illinois-based Managing General Agent specializing in limited medical, voluntary and self-funded benefit options for employers with hourly and part-time workforces, from American Westbrook Insurance Services, LLC., a subsidiary of Hendricks Holding Company, Inc. Terms of the transaction, which includes all assets and trademark rights to The American Worker Plans, were not disclosed. Read more….

Government Contractors – Why it Makes Sense to Comply with ACA. Even if you Don’t Have To!

Government contractors, even if your business doesn’t have enough full time equivalent employees (or “FTEs”) to fall subject to the ACA’s employer mandate, there are still many compelling reasons to “Walk This Way!”

We know, we know. You’ve had 2-3 years of listening to the media, government spokespeople, and benefits advisers “talk this way” about health care reform and deadlines for compliance. Give us just 5 minutes and we’ll give you 4 great reasons to cover your prevailing wage workers.

Why Comply with ACA

• Cost Savings. The funds to pay for health insurance for your workers are right there, in the wage determination on prevailing wage jobs. If you aren’t already using fringe dollars to provide health insurance for your workers, you’re missing out on significant savings on your payroll burden. Now, with ACA and the requirement for every individual to have health insurance, there’s more incentive than ever to use fringe benefit dollars as intended.
  An expense you may not have considered is the cost of replacing experienced workers. The job market for construction workers has turned around and jobs are more plentiful. Rather than trying to purchase health insurance on their own, or navigate the exchange maze, the best workers are likely to look for an employer that will provide health insurance. Given the wages most construction workers earn, particularly on Davis-Bacon jobs, it’s unlikely many will qualify for subsidies. And those who purchase through an exchange will potentially pay higher costs for their premiums. Employers who sponsor a plan are likely to get better rates, reducing the costs to your employees.
• Tax Advantages. If workers purchase health insurance on their own, they pay for it with post-tax dollars. Employer-paid insurance is the only way for employees to leverage pre-tax dollars to pay their insurance premiums, so why not use fringe dollars for this purpose? It results in savings both for your workers and for your business.
• Competitive Advantage. Smaller companies are competing for jobs against large companies which are required to comply with ACA (or pay significant penalties). These companies will likely be using fringe dollars to pay for health insurance premiums – and possibly for other bona fide benefits – and as a result they’ll seeing a significant reduction in their payroll burden. That means the bids they submit will be leaner, putting companies that continue to pay fringe dollars as additional cash wages at a serious disadvantage.
  •Individual Mandate. While it’s true that smaller employers are not legally required to provide health insurance under ACA, every individual in the U.S. is now required to have health insurance. Those who are unfamiliar with health insurance, the terminology used, and the process of comparing various plans can easily be overwhelmed. Again, there’s no longer a shortage of work in the construction industry, and the most skilled laborers won’t have difficulty finding an employer or union that will offer health insurance for both the worker and his or her family.

Using prevailing wage fringe benefit dollars as they were intended – to provide benefits for workers – just makes sense from a bottom-line perspective. Even without ACA, passing up significant savings on payroll burden by continuing to pay the fringe as additional cash wages just doesn’t add up. It’s an unnecessary expense, and the savings can be realized in the form of leaner bids or increased profits. That’s huge in today’s environment of fewer public works jobs. Then there are the tax advantages to both the employee and employer. And finally, the time and cost of replacing good workers can be exasperating to a small business.

Offering ACA-compliant health care is a win-win that saves you money – immediately. If you have questions about ACA or need assistance, please give us a call or send us an email. The Contractors Plan is here to help government contractors navigate the health insurance maze. We’re a one-stop shop for purchasing coverage, administering benefits, and helping to keep you compliant with the many laws and regulations that apply to prevailing wage workers.

Fringe Benefit Group Featured in July Edition of Rough Notes

By partnering with Fringe Benefit Group, we can help you provide the very best in products, administration, and compliance assistance. Read more in the July issue of Rough Notes. Read more…

Raising Minimum Wage for Federal Contract Workers: What to Expect

In June the US Department of Labor (DOL) formally proposed a new rule (79 FR 34568) that implements Executive Order 13658 to increase the federal minimum wage for contract workers to $10.10 an hour beginning in January 2015. The new rule has significant implications for employers who have workers that perform work under covered federal contracts or subcontracts.

Essentially the rule covers all employees who provide services on contracts and/or subcontracts that meet two specific criteria. First, the contract must be one of the following types:

• a procurement contract for construction covered by the Davis-Bacon Act (DBA),
• a service contract covered by the Service Contract Act (SCA),
• a concessions contract, even if it is not covered by the SCA,
• a contract in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public

Secondly, wages paid to the employees under contract must be governed by the Fair Labor Standards Act (FLSA) or the wage provisions of the DBA or the SCA.

The purpose of raising the federal minimum wage, as stated by President Obama, is to “increase efficiency and cost savings in the work performed by parties that contract with the federal government.” The President added that “higher wages increase morale and decrease turnover, resulting in greater efficiency”.

Nevertheless, there will likely be considerable repercussions for employers. When analyzing the possible effect of the federal wage increase, the DOL found that in 2015 almost 184,000 employees will receive a wage increase. That means employers will need to cover $100.2 million is additional wages. These increased labor costs will be passed back to the federal government and may very well result in higher bids for federal contract work.

Employers should be vigilant about checking whether their contracts will be subject to the terms of the new rule. The rule provides employers with extensive details about the scope of coverage for the new minimum wage and establishes new recordkeeping obligations and other requirements. The Administrator of the Wage and Hour Division (WHD) has enforcement power for the rule.

Concerned employers should provide comments in response to the proposed rule implementing the federal minimum wage to the DOL at www.regulations.gov. Keep in mind that the comment period is very brief, as everything must be received on or before July 17, 2014. The DOL expects to review comments and issue a final rule by October 1, 2014. Due to the potentially significant impact this rule could have on employers, federal contractors should monitor this issue for potential developments.

Lots of News out of DC this Week for Government Contractors

There has been a lot of news out of DC this week that relates to government contractors. First, on June 12, Labor Secretary Thomas E. Perez announced a proposed rule raising the minimum wage for workers on federal service and construction contracts to $10.10 per hour. The proposed rule implements Executive Order 13658, which was announced by the President on February 12, 2014.

The proposed rule provides guidance and sets standards for employers concerning coverage, including coverage of tipped employees and workers with disabilities. It also establishes an enforcement process familiar to most government contractors that will protect the right of workers to receive the new minimum wage. The proposed rule includes an economic analysis showing that nearly two hundred thousand workers will benefit from the increase.

More information about the proposed rule and how to submit comments is available at the U.S. Department of Labor Wage and Hour Division’s Website.

On June 18, OFCCP posted additional Frequently Asked Questions (FAQs) responding to questions received from government contractors. The FAQs address requirements of the revised regulations implementing the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act (Section 503). These new FAQs have been added to the many FAQs already published on the OFCCP Web site. The VEVRAA FAQs are available at http://www.dol.gov/ofccp/regs/compliance/vevraa.htm

The Section 503 FAQs are available at http://www.dol.gov/ofccp/regs/compliance/section503.htm

Need Help With the Affordable Care Act? The Contractors Plan is Here to Help!

Most employers with fewer than 100 FTEs probably drew a huge sigh of relief when they got a year’s reprieve from complying with ACA. But now the deadline is fast approaching and many are looking for help and guidance.

The Contractors Plan has focused exclusively on prevailing wage benefits for more than 30 years, and we’ve been following the evolution of ACA since it was just an idea. We’re ready to help Davis-Bacon contractors get into compliance with the law – and we have a proven benefits platform to make everyone’s lives easier.

We Are the Easy Button

We get it. You’re looking at yet another layer of government regulations and wondering how you’ll stay on top of everything. Take a deep breath – we’ve got the “Easy Button” for prevailing wage benefits.

1. Track Hours to Determine Number of FTEs.

The first step in ACA compliance is tracking the number of hours each employee works to determine if you even have to comply. The Contractors Plan has a tool that makes it easy.

It’s called Hour Banking. Hour banking makes it possible for employees to “bank” extra hours worked during peak periods, then draw from this excess to continue health insurance coverage during slow times. With employer provisions of ACA set to begin taking effect January 1, 2015, hour banking is a simple tool for tracking hours worked during your safe harbor period.

When you partner with a benefits provider that specializes in Davis-Bacon contracts, administration of the program is done for you. Hour banking can be done for companies working on projects in several states, across multiple job sites and employees who perform work in different job classifications.

From the standpoint of tracking premiums, hour banking helps contractors who work varied hours and types of projects by distilling rates paid on both types of contracts into one rate. Multiple benefits can be tracked – meaning health insurance, dental and vision insurance, and more can easily be tracked and hour banked.

2. Use the Fringe to Save Money and Comply with ACA.

When you use fringe dollars to pay for bona fide benefits with health insurance, you can avoid the penalty taxes in ACA. You can round out the benefits with specialty insurance and retirement plans for your employees, and all of those dollars are removed from payroll. That means you don’t pay FICA, FUTA, SUTA, and – in most states – workers compensation on those funds.

Those assessments can add up to as much as 30 cents on each dollar per employee per hour. Over the life of a contract, that creates significant savings that you can use to submit leaner bids or increase your profitability.

When you work on prevailing wage jobs, the money to pay for benefits is right there, spelled out in the wage determination.

3. One-stop Shopping.

Working with The Contractors Plan simplifies and streamlines offering benefits for your workers. Here’s how:
•Use fringe dollars to pay all or part of your workers’ health insurance premiums.
•Maximize your payroll savings by using any remaining fringe dollars to offer supplemental benefits like vision, dental, disability and life insurance. Or,
•Funnel excess fringe dollars into a retirement plan. This benefits you as a company owner, as well, by increasing the amount you can put away for retirement.

Now here’s the simple part. All you have to do is upload your file and submit a single check.

We take care of everything.

We track eligibility, pay the carriers, and make sure everything runs smoothly. And if you decide to offer a loan program as part of your retirement plan, we can do that, too. All of it.

When you work with a partner that understands the government contractor niche, offering and administering benefits – and complying with the laws – is pretty painless. And it saves you money, too.

The clock is ticking for ACA compliance. Give us a call and let’s discuss how we can help you.