Fringe Benefit Group Partner ConstructionConnection.com Promotes New Website for The Contractors Plan

Fringe Benefit Group, a partner of the construction industry hiring and networking site ConstructionConnection.com, recently launched a new website at TheContractorsPlan.com, making it easier than ever for businesses to enroll in and manage their prevailing wage benefit plans.

Designed to help contractors minimize costs while maximizing benefits for their employees, The Contractors Plan helps construction company owners bid more competitively and comply with numerous laws and regulations, including the Affordable Care Act (ACA). Construction Connection Co-Founders Kent Leighton and Suzanne Breistol are enthused to share the benefits of the plan with their community of over 100,000 construction industry professionals.

The Contractors Plan is Fringe Benefit Group’s prevailing wage benefit plan. Contractors who work on projects subject to the Davis-Bacon Act, Service Contract Act and state prevailing wage laws are facing incredible competition in 2014, making reducing costs and maintaining compliance vital to winning more construction projects. The Contractors Plan enables contractors to submit leaner bids, win more jobs, and save on taxes and insurance costs. The Contractors Plan also makes it easy for business owners to maintain ACA compliance, no matter what size company they are running. With its new intuitive, user-friendly website, enrolling in and managing benefits in The Contractors Plan is even easier.

“We worked hard to incorporate feedback from our employees, customers and partners to create a best-in-class site that provides better service with practical tools and a clean, intuitive interface,” explains Adam Bonsky of Fringe Benefit Group. “We wanted to provide our customers with improved access to important benefits information and we also wanted to provide educational resources to help contractors and producers understand and navigate the government contracting space.”

TheContractorsPlan.com includes many features designed to help users, such as explanatory videos and a single sign-on for all users. This means participants, contractors and brokers can log in and be directed straight to the information they need. More information is available here.

The site also features many helpful tools and calculators. Contractors can input their employee data and see what their payroll and insurance costs savings will be with The Contractors Plan. They are also able to see the individual components of The Contractors Plan, which is especially useful for businesses that enroll in Total Fringe, a unique option for using the entire fringe portion of the prevailing wage to offer benefits to construction employees. The site also includes information about how ACA will impact their business.

“With Total Fringe, you choose the benefits you want to provide to your employees and we take care of all the details, including combining the cost of all coverage into one hourly rate, paying all the carriers, and administering all the programs,” says Bonsky. “Best of all, our customers send in one check and upload one file, regardless of the number and types of benefits they choose. The Contractors Plan’s full suite of benefits includes major medical, dental insurance, vision insurance, life insurance, Critical Illness insurance and retirement plans. We provide all administration for these programs, and we can do it by job and by hour.”

Fringe Benefit Group and Construction Connection share a mission of strengthening the construction industry and supporting construction companies and individuals, making the partnership a natural fit.

“Kent [Leighton] and Suzanne [Breistol] are committed to their Construction Connection partners. They have introduced us to prospective customers and are continually looking for additional ways for us to educate their members about how our prevailing wage benefit plan can improve their business,” Bonsky says of the partnership.

Leighton and Breistol are very excited to get more members signed up for The Contractors Plan, as it is a valuable asset for all their members. Construction companies can save money, and individuals from project managers to skilled tradesmen and construction cost estimators to concrete finishers can receive crucial health insurance and save towards their retirement.

DOL to Expand Overtime Pay

President Obama will issue a memorandum directing the US Department of Labor (DOL) to strengthen rules on overtime. This could lead to extra pay for millions of workers who aren’t currently paid for their extra hours of work. Importantly, this change will also impact Service Contract Act-covered contracts since the FLSA overtime rules also apply to SCA contracts.

Currently federal rules stipulate that hourly workers are paid time-and-a-half if they work more than 40 hours in a week. Salaried workers, on the other hand, only receive overtime if their regular salaries are less than $455 a week — a threshold established in 2004.

The memorandum may direct the DOL to revise the rules to expand the number of employees eligible for overtime pay by increasing the salary threshold for overtime eligibility and by changing the definition of manager.

While a regulatory change does not require Congressional action, it could take well over a year to implement. The DOL will have to publish a proposed rule and seek public comments.  At the present time the Administrator position of the Wage and Hour Division is awaiting Senate confirmation.

Obama Administration Delays ACA Provision

The Obama Administration has delayed another provision of the Affordable Health Care Act. Read the Wall Street Journal’s article on the delay here.

IRS Issues Final Regulations on the Employer Mandate Under ACA

February 12, 2014, the IRS published final regulations applicable to the employer “Shared Responsibility” taxes often referred to as the Employer Mandate. The regulations and explanation are 227 pages and affirmed most of the proposed regulations they published a year ago and relaxed some rules, but added and expanded several. The headline was that employers with 50 to 99 full-time equivalent average employees in 2014 are not subject to the mandate in 2015. However, there were a variety of important items applicable to contractors.

1. Employers with 50 – 99 full time employees in calendar year 2014 will not be subject to either the 4980H(a) $2,000 tax or the 4980H(b) $3,000 tax penalties in 2015. To qualify for this change, the employer may not terminate employees or reduce hours for any employees during the period 2/9/2014 to 12/31/2014 for the purpose of avoiding the employer mandates. The employer may not eliminate or reduce any health coverage offered on 2/9/2014 through 12/31/2014 (or the last day of the plan year beginning in 2014).  The employer must certify to the IRS to that they meet these requirements to be exempt for 2015.
2. Reintroduced the transition rule for determining Large Employer status. For the 2015 coverage year, only employers with 100 or more full time employees in calendar year 2014 are subject to the 4980H tax penalties.  During 2014, employers may choose any six-consecutive month period to determine whether they meet the 100 full-time equivalent employee threshold, rather than the full year 2014. The IRS indicated this rule may be extended to future years.
3. Provided details on who must be covered, and explains application if the employer doesn’t use the safe-harbor look-back method.  The look back method evaluates which employees historically worked more than 30 hours per week on average (“full-time employees” – the employees who subject coverage and the tax for noncompliance.) If those employees are considered full-time employees in the historical measurement period, they must be covered during the following stability period (vice-versa, do not need to be covered), generally without regard to the number of hours they work during the stability period. The IRS introduced a new method of determining who is considered a full time employee of a large employer subject to coverage. This is called the Monthly Measurement Method. Generally employees who work more than 30 hours per week on average during a month must be covered by the health plan or the employer is subject to both the 4080H(a) and (b) tax penalties. This rule says that the first full month an employee would otherwise become eligible for the health plan (i.e. an employee who previously worked 20 hours per week moved to full time status), and for the following two months, the employee does not need to be covered by the health plan, and the employer is not subject to 4980H(a) $2,000 penalty during that 3 months. If the coverage then offered meets the minimum value requirements, they would also not be subject to the 4980H(b) $3,000 tax penalties during that 3 month period. Employers may use different methods for different groups of employees and may change their methods for the determination.
4.  Large employers generally must cover 95% of full time employees to avoid the 4980H(a) $2,000 and 4980H(b) $3,000 penalties in a year. However, for 2015, employers must only cover 70% of full time employees to avoid the 4980H(a) penalty. This relief does not apply to the $3,000 4980H(b) penalty.
5.  Calculation of 4980H(a) $2,000 penalty for 2015 (and for months in 2016 covered by plan years beginning in 2015). For employers with 100 or more full time employees in 2014 that are subject to the penalties in 2015, the calculation of the $2,000 penalty only applies after the first 80 (rather than 30) full-time employees.
6. do not need to cover dependents in 2015. If dependents were covered in either plan year 2013 or 2014, then this transition relief is not available (cannot step back). First Year as a Large Employer. The first year an employer becomes a large employer they are not subject to tax penalties if they offer coverage to their full time employees by April 1 (rather than January 1) to those employees who did not previously have employer health coverage.
7. Taft-Hartley coverage – during a month an employer contributes to a union plan they will be considered as offering coverage for that employee. The final regulation’s preamble provides “interim” guidance on union plans that may be relied upon until final rules are issued.

Obama Administration Delays Part of ACA Employer Mandate

This week the Obama Administration announced it is delaying part of the employer mandate outlined in the Affordable Care Act until January 1, 2016. The delay applies to companies with between 50 and 99 FTEs.  

Companies with 100 or more full-time workers are still required to comply with the mandate to offer health insurance to their workers starting January 15, 2015 but it will be phased in starting from 70 percent in 2015 to 95 percent in 2016 and beyond. Those who do not comply face financial penalties.

Contractors who work on projects that fall under the auspices of the Davis-Bacon Act or Service Contract Act have funds designated in the wage determinations for each job classification to pay for benefits for hourly workers. Using the fringe portion of the wage to provide benefits results in significant savings on payroll burden, relieves workers of the hassles of trying to find health insurance on their own, and helps contractors who are required to provide health insurance to comply with ACA. To us, it just makes sense to use these dollars as intended.

Check back for more information on this and other ACA developments.

Expected Impact of Minimum Wage Increase for Federal Contractor Employees

President Barack Obama announced during his state-of-the-union speech that he intends to raise the minimum wage for federal contractor employees to $10.10 per hour.  This change will apply to new contracts, which perhaps includes option years, and cover workers performing services or construction making less than $10.10 per hours.  The President intends on making this change through an Executive Order which at the time of this writing has not been published.

The largest impact will likely occur on contracts being performed at remote or very rural locations as urban areas typically have higher rates.  The greatest impact will also likely be on food service, custodial, and other low wage occupations.  Since SCA and Davis-Bacon Act wage determinations are based on surveys this increase in the minimum level will likely have an escalation effect on all other rates.

It remains unclear how the Administration will address other factors such as fringe rates on SCA or Davis-Bacon Act covered contracts, contracts for commercial services, and other issues.

This White House move is consistent with this Administration’s use, as well as previous Administration’s use of executive actions to influence labor policy in areas such as non-displacement of SCA employees and project labor agreements.

How to Use Fringe Dollars to Help with the Construction Worker Shortage

The AGC’s Ken Simonson is one of the most well-respected economists in the construction industry. So when he states that his main concern for 2014 is the shortage of workers, you can pretty much take that information to the bank.

In a recent blog, Simonson states that between November 2012 and November 2013, 830,000 construction employees left the unemployment line – but the construction industry only added 327,000 employees during that time. The conclusion? Most of the experienced workers are no longer working in the industry.

Simonson goes on to say that getting experienced workers back will be a challenge in the coming year. “To get them back, contractors will likely have to spend more on wages, benefits and bonuses.”

The good news for government contractors is that prevailing wage work pays higher wages than private jobs, making it more attractive to these workers. More good news: the wages specified for these jobs contain dollars intended specifically for the benefits Simonson lists as a key factor in attracting workers.

Each job listed in a contractor for a project funded by taxpayer dollars includes a list of wage determinations for its required positions – such as welder, carpenter, and so on. These wage determinations include a specified amount for both the base wage and the fringe benefit amount.

Using fringe dollars to provide benefits for workers has several benefits in addition to making employment with your firm more attractive to experienced workers:

• Reduction of payroll burden. Dollars contributed to fringe benefits plans for workers on prevailing wage jobs are not subject to payroll burden, and are therefore exempt from costs such as FICA, FUTA, Workers Compensation and – in some states – general liability.  Generally speaking, this amounts to a savings of 30 cents for every dollar used to provide benefits. Over the life of a contract, that adds up to significant savings.
• Reduction in tax liability. When employers provide benefits for their workers, they can take advantage of applicable tax breaks.
• Compliance with the Affordable Care Act. Contractors with 50 or more FTEs will be required to cover their workers in less than a year. Even companies that are not subject to the mandate should consider offering health insurance as a recruiting incentive and cost-reduction strategy.
• Increased ability for owners and key employees to save for retirement. The more your employees contribute to retirement plans, the more you can contribute.

Using prevailing wage contributions to lower job costs also has the advantage of making your bids more competitive, which will be especially crucial in the coming year.

In the same blog post, Simonson writes that he expects a small decline in public construction in 2014. That means increased competition for fewer jobs. If you’re bidding against contractors that are taking advantages of costs reductions as a result of using fringe dollars to provide benefits – and you’re not – you’ve already lost the bid.

To learn more about using fringe dollars on prevailing wage jobs to benefit your employees and your company, contact us at The Contractors Plan. We’ve focused exclusively on benefits for government contractors for more than 30 years, and we understand the specific needs of the industry.

Economic Outlook for 2014

In its recently-released publication “Economic Cycle Update”, Investment Advisers Manning & Napier review key drivers of the U.S. Gross Domestic Product to determine whether their prediction for a slow/below trend economic growth rate for the U.S. economy should be adjusted.

The four key indicators reviewed are: consumer spending, corporate investment, government spending and trade. Manning & Napier find both good news and cause for caution in all four sectors.  

1. Consumer spending. In its report, Manning & Napier state: “ . . . consumers played the starring role in the slow growth base case . . . “.  However, the current financial obligations ratio for homeowners is at its lowest level since the early 1990s. Manning & Napier go on to say that the lion’s share of improvement has come from consumer debt reduction.
   Offsetting this positive news is the fact that wage growth tends to be low for most Americans. With debt growth unlikely to fuel consumer spending going forward, income growth is essential for consumption growth to accelerate.
2.  Corporate Investment.  In contrast to the struggles faced by most consumers, U.S. corporations have thrived by putting off investments and hiring as the economy improved. While Manning & Napier report modest improvements in hiring and investment intentions, uncertainty over government-related issues such as the debt ceiling and the Affordable Care Act are expected to prompt a continuation of a conservative attitude for businesses overall.
3. Government.  While October’s struggles regarding the debt ceiling and sequestration heightened public awareness of the government’s role in the economy, Manning & Napier states “we do not see the government sector as a meaningful swing factor in either direction for economic growth”.  Record federal debt is expected to continue to hamper federal spending and tax changes and the expiration of certain programs are predicted to create “a modest drag” on the GDP.

 In conclusion, Manning & Napier’s analysis reports that the improvement in consumer balance sheets, along with signs that business hiring and investment plans may be improving, have the potential to positively contribute to the nation’s economic growth. However, ongoing “slack” in the labor markets and uncertainty regarding government policies point to the likelihood that the economy will remain on a low growth trajectory.

 You can read the entire report by Manning & Napier here.

What’s Expected of a Retirement Plan Fiduciary?

A retirement plan fiduciary is expected to uphold certain ethical standards when performing their duties. These include:

• Serving with complete loyalty to the plan participants and beneficiaries
• Ensuring that the plan is operating in accordance with the plan documents and ERISA guidelines
• Performing their duties in a skillful, prudent and diligent manner
• Diversifying plan investments
• Evaluating and paying only reasonable expenses for administration of the plan and investment of the assets
• Avoiding conflicts of interest

Any one of these standards is a big responsibility. Collectively, they represent a full-time job requiring specific skills and education. When you work with a plan provider that understands how to structure the plan to minimize liability, a huge burden is removed from you and your company.

Selecting a Service Provider is a Fiduciary Function

However, selecting a service provider is, in and of itself, a fiduciary role. In the DOL’s publication “Meeting Your Fiduciary Responsibilities”, these guidelines are provided for selection:

When considering prospective service providers, provide each of them with complete and identical information about the plan and what services you are looking for so that you can make a meaningful comparison.

For a service contract or arrangement to be reasonable, service providers must provide certain information to you about the services they will provide to your plan and all of the compensation they will receive. This information will assist you in understanding the services, assessing the reasonableness of the compensation (direct and indirect), and determining any conflicts of interest that may impact the service provider’s performance.

Additional Considerations

Some additional items a fiduciary needs to consider when selecting a service provider include:

1. Information about the firm itself: financial condition and experience with retirement plans of similar size and complexity;
2. Information about the quality of the firm’s services: the identity, experience, and qualifications of professionals who will be handling the plan’s account; any recent litigation or enforcement action that has been taken against the firm; and the firm’s experience or performance record;
3. A description of business practices: how plan assets will be invested if the firm will manage plan investments or how participant investment directions will be handled; and whether the firm has fiduciary liability insurance.

An employer should document its selection (and monitoring) process, and, when using an internal administrative committee, should educate committee members on their roles and responsibilities.

Interested in a complimentary analysis of your retirement plan’s fiduciary structure? Contact us.

Considerations in Choosing a Fiduciary for Your Retirement Plan

Serving as a retirement plan fiduciary is a big job, with many moving parts to coordinate. And fiduciaries answer to some pretty big guns: the IRS, the Employee Retirement Security Act (ERISA) – under the Department of Labor, and where the investments are concerned, FINRA and the SEC.

What Questions Should I Ask?

The three primary questions to ask when choosing a named fiduciary for your retirement plan are:

1. Do the decision-makers have the knowledge required to carry out their responsibilities effectively? Research a potential fiduciaries experience, education, and licenses related to acting as your retirement plan fiduciary.
2. Are the decision-makers motivated to stay current on retirement regulations and the performance of the plan’s investment options?Regulations pertaining to retirement plans are complex. It can be difficult to stay on top of your personal investments, let alone the array of investment options for a retirement plan. Both of these duties require a professional qualified to perform them.
3. Do the decision-makers have the time to prudently select and monitor each investment option and service provider?  Will the decision makers know when an investment option is no longer appropriate for the plan? What process will they use to make this determination?

Structuring Your Retirement Plan to Minimize Your Liability

If you’ve been following our series on considerations regarding retirement plan fiduciaries, no doubt it’s become clear that a company owner should not be a named fiduciary. There’s just no way anyone has time to run a business AND fulfill all the duties required of a plan fiduciary.

When you work with a plan provider who understands all the implications of fiduciary responsibility, your risk is minimized and you and your assets are protected.

In our next blog, we’ll cover the “Fiduciary Code of Conduct” which outlines how fiduciaries are expected to handle their responsibilities.

Contact us for a complimentary risk analysis of your company’s retirement plan.