On September 30 of this year the USDOL finalized guidance on Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors.  The Final Rule specifies the contracts and employees covered by the EO, including procurement contracts for construction covered by the Davis-Bacon Act (DBA.)  Included in the finalized Executive Order are rules dictating how the sick leave will accrue, when it can be used, and how the Department will ensure compliance.  If you are a contractor doing Federal Davis-Bacon or McNamara-O’Hara Service Contract Act (SCA) work, contact GMR Associates, Inc. today to be sure you’re prepared at the turn of the new year.
Chris Van Aken Co-presents on NYSDOL Investigation Preparation

May 12, 2016 – GMR Associates, Inc.’s Chris Van Aken, ERISA Plans and Compliance Manager, co-presented with Mark Moldenhauer, Esq., Bond, Schoeneck & King, LLC to western New York’s Empire State Associated Builders and Contractor Association members.  Chris focused primarily on the Bureau of Public Works Investigations given his extensive experience assisting clients with investigation resolution over the last decade.  According to Van Aken, it’s imperative to ask yourself, “If an investigation was conducted today, would my organization be ready?” and provided guidance on the proactive steps contractors can take before an investigation is imminent.  Moldenhauer covered Federal Labor Laws under the Fair Labor Standards Act, which nicely complemented the state focus. 

About GMR Associates:
GMR has been a trusted third-party administrative service provider for prevailing wage plans, annualization compliance, and investigation support for more than 20 years.  We focus on small and mid-size merit shop contractors working in many states. In 2015, we helped our clients manage tens of millions of dollars of state prevailing wage, Davis-Bacon Act, and Service Contract Act fringe supplements and their accompanying regulations using a variety of compliance techniques.  Want a second opinion? Call us at 1-800-724-4817or send us a message through our website.
The old adage about things that sound too good to be true applies doubly when it comes to prevailing wage benefit plans. It seems like the rate is always higher, the hours are always longer, the punch list keeps growing, and the float on payments is forever.

That has always been our experience too, until the other day when a potential client wrote us this email:

“When I asked about the annual testing he said, ‘Our design has been deemed by the New York State Department of Labor to meet the exception to the annualization requirement. Our design is deemed by them to be equivalent of paying the people in cash, although obviously we are not doing that.’ I don’t necessarily like sending direct information from one vendor to another, but I am concerned. What kind of Plan would this be then?”

This would be a Cafeteria Plan. A Plan the NYSDOL openly promotes on their website as compliant with NYSDOL annualization regulations. From NYSDOL Article 8 FAQ’s online :

“A: Yes. A true Cafeteria Plan, where the total dollar value of the supplement amount is provided to the employee and the employee is provided the option or vehicle to purchase their own benefits, is considered the same as cash.”

This raises some red flags for us. The first is, in our experience, the NYSDOL Bureau of Public Works doesn’t deem anything. They only investigate your prevailing wage benefit plan, assess the willfulness of any violations they find, and then act on their findings. There is no pre-approval process.

Secondly, not all Cafeteria Plans are created equal. The word “true” in the NYSDOL answer presents a problem for this potential client. That’s because a Cafeteria Plan is a separate written plan, maintained by an employer for employees, that meets the specific requirements and regulations of Section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a Cafeteria Plan must be permitted to choose among at least one tax qualified benefit and one taxable benefit (such as cash).

Don’t take our word for it, check for yourself. See what Cornell’s index of IRS Code says in section 125.d.1.B.  Do you run a Cafeteria Plan? Are your participants offered a cash option? Did you ever offer them cash in their check? Does your Cafeteria Plan empty into a retirement Plan? If so, that’s not cash and something’s not right. Contact us today for a free consultation on your prevailing wage benefit plan.

About GMR Associates:
GMR has been a trusted third-party administrative service provider for prevailing wage plans, annualization compliance, and investigation support for more than 20 years. We focus on small and mid-size merit shop contractors working in many states. In 2015, we helped our clients manage tens of millions of dollars of state prevailing wage, Davis-Bacon Act, and Service Contract Act fringe supplements and their accompanying regulations using a variety of compliance techniques. Want a second opinion? Call us at 1-800-724-4817 or send us a message through our website.
Benefit Claims: Why are they required and when is one made?

Construction companies elect to use Prevailing Wage (PW) Fringe Supplements for a bona fide benefits program for a variety of reasons, ranging from building increased employee satisfaction to saving on payroll burden.  Whatever the reason may be, there must be a clear audit trail leading to payment of bona fide fringe benefits.  A ke
y component of an audit trail is a benefit claim.  Benefit claims come in many forms, such as an insurance premium statement or retirement plan deposit record.  But, claims made at the individual participant level, generally accrued vacation or supplemental unemployment claims require participant level claims.

With that being said, why is a claim required?  Simply put, in order to be considered a bona fide fringe benefit, the participant must make a claim.  Without this claim record, the IRS may rule that even though there was a payment, the payment was not a bona fide fringe benefit.  Ask yourself, would an employee just stay home and expect vacation pay without letting you know they wanted a day of vacation pay?  Absolutely not!  To receive the vacation pay “benefit” an employee must make a request.  At GMR they are participants, not employees.  Participants make benefit claims instead of filling out vacation request forms.

When may a trust participant make a claim?  A trust participant may make a claim any time they wish to receive accrued vacation/PTO or supplemental unemployment benefits.  A vacation/PTO claim can be made anytime there are accrued vacation/PTO funds available.  A supplemental unemployment claim may be made when a participant misses work hours.  Typically supplemental claims in the construction industry are made during a seasonal layoff period, but partial week claims may also be made during the work season.  All claims and records of payment are kept for audit purposes.

When does an employer make a claim?  A monthly medical insurance premium is a great example of an employer submitted benefit claim.  The employer forwards the premium statement to GMR, GMR checks trust account balances, participant by participant.  We then mail a check made out to the insurance company to cover only the trust participant’s portion of the insurance premium.  In this case, the employer submitted the claim (medical insurance monthly bill) and the trust paid it.  The bill and proof of payment are kept for audit purposes.  Please note bona fide benefits plans and their structure vary by company need.

So, bottom line, benefit claims are required in order to pass yearly certified audits as well as many types of government audits and can be made anytime there is a bona fide benefit that must be paid for (employers) or anytime bona fide vacation/PTO or supplemental unemployment funds are available (participants).

NYSDOL Annualization of Fringe Supplements: What are the rules?

If you’ve determined that New York State Department of Labor (NYSDOL) annualization regulations indeed apply to you, you may be asking yourself, “What do I do next?”  On the surface it’s simple.  “Annualization” refers to the time period over which employer contributions are divided by to calculate an hourly credit that applies toward the stated NYS prevailing wage (PW) fringe supplement rate.  In effect, annualization means that NYS PW fringe supplements cannot be used to subsidize benefits on private work. 

In practice, you’ll want to know which benefits count toward the credit, how to treat Davis-Bacon fringe supplements as well as prevailing wage fringe supplements from other states.  You need to know that ALL NYS PW fringe supplements are annualized if they are used for benefits.  This is different than Davis-Bacon annualization.  And don’t forget, annualization calculations are done employee by employee, not on a pooled basis.  Once you calculate your hourly benefit credit, withhold the credit amount per hour on NYS PW jobs and pay the remainder in the employees weekly pay check.

Don’t forget to fill out the certified payrolls correctly, front and back, with respect to what you are doing with NYS PW fringe supplements and keep thorough records.  You may want to adopt an annualization compliance policy with a clear, written methodology.  If you have any question as to whether an employer expense incurred on behalf of an employee qualifies for inclusion into the Annualization calculation, contact your local NYSDOL office or your compliance consultant.

GMR has been actively involved with the Associated Builders and Contractors of NY Skilled Trades Explorer Post for a number of years. The program is a unique opportunity to learn more about trades which include:

Project Management

Exploring is a career education program for young men and women ages 14 through 20.  You will participate in hands on projects on site with local contractors from each trade. You will be able to receive advice and guidance to help you take the steps now to position yourself for a successful career in the skilled trades. 

The program consists of one two hour session each month, Oct-May except January, with one contractor hosting each session devoted to their respective specialty. 

the 2015-16 introductory meeting will held on October 6, 2015 at Hope Hall. A $25 fee is payable at the kick-off meeting by those who decide to enroll. Please see the below flyer for those who are interested or know someone who could be interested for more details. 

NYSDOL Annualization of Fringe Supplements: Does it apply to me?

Let’s take a look.  According to the New York State Department of Labor (NYSDOL,) employers have three options when it comes to providing NYS prevailing wage (PW) fringe supplements:

1 -  Pay the PW fringe supplements as cash in the paycheck, along with the required prevailing wage base rate.  Fringe supplements paid to an employee as cash are not subject to the annualization calculation.  The NYSDOL defines “cash” as money given to the employee in a paycheck (reportable on an IRS Form W2) subject to all employee taxes (i.e., federal and state income tax) and subject to “burden” (i.e., FICA, possibly SUI.)  Be careful, NYS prevailing wage fringe supplements deposited into a fully vested, qualified retirement plan are not considered to be a cash payment of the fringe supplements by the NYSDOL and are subject to NYSDOL annualization regulations.

2 - Use the fringe to provide a bona fide benefit plan for the employee, or

3 - A combination thereof.

If you are using NYS prevailing wage fringe supplements in part or in total to provide bona fide fringe benefits, NYSDOL annualization regulations probably apply.  It’s an easy question to answer with the simple flow chart below:

If you are not subject NYSDOL annualization regulations, Congratulations!  Just remember, you are not taking full advantage of prevailing wage fringe supplements to purchase benefits you provide to your employees, and, the answer may change state to state and even in NY if you are working under the Davis-Bacon Act or for HUD.

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