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Davis Bacon Fringe Benefit Administration


Guest Gopherwhisperer
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Guest Gopherwhisperer

When a company gets a Federal Funded contract, do they have to set up a fringe benefit account at that time? That is does each contract require a new plan?

I work with a TPA who provides their clients, for which we serve as trustee, a trust and plan document and a service agreement. The TPA says they cannot contract directly with the company on this service agreement. Instead, they have written the document such that the trustee must hire the TPA. I am wondering if this is necessary. And if it is, what is the basis for it. Why can't the client and the TPA deal directly with each other?

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Interesting questions. My (admittedly rudimentary) understanding of Davis-Bacon Act and related laws (such as the Service Contract Act) is that they address what the employer must contribute to a fringe benefit plan as part of its prevailing wage commitment. Once the dollars are in the trust/plan, my guess is that they can be used for any appropriate plan purposes, including administrative expenses.

If the trust is going to pay administrative expenses in any event, why should it matter (for purposes of D-B or the SCA) who hires the TPA? But, I'll defer to those with more experience in this field.

:blink:

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The question is not whether they "have to set up" a fringe benefit account. They could go ahead and pay the benefit in cash, for example, and still meet the requirements of Davis Bacon. The real question is whether they are better off establishing fringe benefit plans, and the answer is yes, it will save them payroll taxes. This explanation should be in the TPAs materials as well.

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I have seen this scenario before, in So. Cal. The TPA contracted with the trustees of an association that qualified for Davis Bacon work. The employer did not contract with the tpa, rather, it was at the association level. I am sorry, I do not remember the exact reason behind it, but I do remember it was a good one. I was with a carrier that provided medical coverage to the association.

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