Davis Bacon Credit for Health Plan Coverage

[Guest kodle]

It is common in the construction industry for employers to take Davis Bacon fringe benefit credit for dollars contributed to a welfare benefit plan (funded through a 501©(9) trust) for periods that the employee is not eligible to participate in the plan. For example, the plan requires completion of 300 hours before eligibilty kicks in, and the employer takes DB credit for the dollars contributed to the trust during that 300-hour period of ineligibilty (including where the employee never becomes eligible to participate because he terminates before eligibility). This contradicts the holding in DOL Opinion Letter No. 1253 (WH-201), February 28, 1973 (old law but I have found nothing later to contradict it). I recently had a DOL agent bring this opinion letter to my attention during an audit, but it does not seem to be followed or applied with any uniformity. Has anyone had any experience with this rule or are you aware of any subsequent guidance that holds to the contrary? Or, was I lucky enough to just get an especially well-read DOL agent?

[GBurns]

How can you have ineligibility if the health benefit that is provided is part of the employee's wages that could have been paid in cash and is part of the Prevailing Wage as per the Wage Determination for that job by the DoL?

Or are you only referring to an employer amount over and above that taken from the wage redirection?

[leevena]

I was involved in a Davis-Bacon group for 3 years recently, as the carrier rep. It is ok for the DB dollars to be taken and placed into the plan as you described. Any extra monies left, such as in your situation, the dollars are "swept" out of that persons account and revert back to the benefit of the trust. I cannot comment about the DOL audit, however, the two administrators for the two plans I was involved in were both competent and had a large numbrer of plans being administered. So, long story short, I would be comfortable with the withholding of the dollars. Hope this helps.

[GBurns]

It is a basic tenet of Davis Bacon that money taken from an employee's wages cannot revert to the employer.

leeevena

I spent more than 6 years and my administrator was the largest. I sold/or serviced more than 20 plans and went through many more than 3 DoL and state/county audits of those plans and audits of others. I would not have posted any of this mainly because it is irrelevant. I know people with vastly more time in the industry who can still hardly manage to find their car in a parking lot.

[leevena]

GBurns, I don't pretend to be an expert. I was just outlining what I saw happen to a few of them in San Diego where I live. I never said the dollars reverted to the employers...rather to the plan.

[GBurns]

leevena

I apologize, you did state plan not employer.

That is why I asked the OP for clarification as to whose funds these were so as to see if DBRA non-forfeiture and no vesting applies.

One of the reasons that DoL and PW entities have a problem even with reversion to the Plan is that in the past it was very prevalent to have plans designed and operated with the sole purpose of having the forfeitures be allocated to the remaining plan participants, in reality lone surviving participant. Guess who this was?

Many of these are still around and there still are many administrators and providers who subscribe to this. I think only because they do not have enough plans administering to need to either get into the finer details or to get blasted in an audit. Enforcement is also weak in many areas and especially among contractors who do not do many jobs.

[Ron Snyder]

I don't think you're really having a disagreement.

So long as the contributions are made to the health plan (you mentioned VEBA Trust) and cannot revert to the employer, the employer can count them as Davis Bacon (or Service Contract Act) wages.

Non DB or SCA employees should not be covered under the same plan, or if they are, should be walled off from receiving any of the economic benefit of the contributions for DB or SCA employees.