Prevailing Wage Bona-fide Fringe Benefit Hour Bank

[Guest SCUDDESLER]

Suppose an employer receives a federal construction contract which requires it to comply with the Davis Bacon Act. Under the Davis Bacon Act, the employer is required to pay its employees a "prevailing wage." The employer would like to pay a portion of the "prevailing wage" in the form of a "bona-fide fringe benefit." Specifically, the employer will "contibute" an amount equal to the cost of single/family health insurance (whichever was elected by the employee). For all practical purposes, this means the employer gets a "credit" towards its payment of the prevailing wage.

In this case, the employer's health insurance plan, which is self-insured, has a COBRA premium rate of $142.51 for single coverage and a COBRA premium rate of $406.16 for family coverage.

Further, suppose the employer's work on this contract is seasonal so that some of its employees work nine months and are laid off the other three (only to be brought back in the spring). In order to determine an "hourly" charge for the fringe benefit contribution, the employer has assumed the employee works, on average, 140 hours/month for the nine month period of active employment. Thus, the hourly "single premium" charge is calculated as follows:

140 hours x 9 months = 1260 hours per year

$142.51 x 12 months = $1710.12

$1710.12 divided by 1260 hours = $1.36 per hour for single health insurance benefits

The employer would like to create an hour bank that will operate as follows:

       Total   DB     Benefit  Benefit  Current   Cumulative

Month Hours Hours Earned Cost Bank Bank

1 0 0 0 142.51 (142.51) (142.51)

2 0 0 0 142.51 (142.51) (285.02)

3 0 0 0 142.51 (142.51) (427.53)

4 150 150 204.00 142.51 61.00 (366.53)

5 160 160 217.60 142.51 74.60 (291.93)

6 150 150 204.00 142.51 61.00 (230.93)

7 160 160 217.60 142.51 74.60 (156.33)

8 160 160 217.60 142.51 74.60 (81.73)

9 160 160 217.60 142.51 74.60 (7.13)

10 140 140 190.40 142.51 47.40 40.27

11 140 140 190.40 142.51 47.40 87.67

12 60 60 81.60 142.51 (61.40) 26.27

Under this hour bank program, the employee must use the amounts allocated to his/her hour bank account to pay for benefits during the months he/she is laid-off (January through March). Is this permitted under the Davis Bacon Act? Specifically, does this violate the requirement under the Davis Bacon Act that fringe benefit contributions may not be used to fund a fringe benefit plan for periods of non-government work?

Finally, please consider the fact that non-prevailing wage employees for this employer are paying nothing towards the cost of health insurance.

[Guest GuyHocker]

My reading of the pertinent CFRs is that fringe benefits have to be based on payperiod compensation. This would preclude averaging total benefits over prevailing wage hours. Rather, you should determine prevailing/total ratios for hours and benefit payments.