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Health Care Reform – How Does it Affect Government Contractors?

June 25, 2010 Written by: Written by Paul Gaudet, Director of Group Benefits


Government contractors are already required to comply with various laws like the Davis-Bacon Act and the Service Contract Act.  The passage of health care reform adds yet another layer of legal requirements with which contractors must comply. Navigating this maze can seem overwhelming – but contractors don’t have to go it alone. There are resources available to ease the burden of compliance and allow contractors to stay focused on running their businesses.

By putting the fringe portion of the prevailing wage toward benefits, business owners will be compliant with the new health care mandates, avoid IRS penalties, and bring down their payroll costs. A benefits partner who fully understands the government contractor marketplace can provide assistance with accounting requirements and compliance with both the DOL and IRS regulations.

Construction industry employers with more than 50 employees will be required to offer health care coverage to their employees beginning in 2014, which can be paid for with fringe dollars via a prevailing wage benefit plan. Effective this year, some small businesses which provide health insurance for their workers may be eligible for a tax credit under the PPACA – another incentive to use these dollars to provide benefits.

Maintenance and service (SCA) contractors who employ workers at government facilities must also pay the wages and fringe benefit amounts of their workers as determined by the Department of Labor (DOL). SCA contractors who currently offer limited medical plans or no benefits to their employees will be required to offer health care coverage, which can also be paid for with fringe dollars.

The time to act is now.  Some contractors may currently be offering plans which will no longer be compliant as soon as this September.