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The Contractors Plan

How Acosta May Lead If Confirmed As Secretary Of Labor

March 01, 2017 Written by: Brittney Penney

President Trump has nominated attorney Alexander Acosta to head the Labor Department. With over two decades of public service, Acosta has a reputation for having a competent management style and a distinct respect for justice which may provide some insight into how he may lead the Labor Department.

Currently, Acosta is the Chairman of U.S. Century Bank and dean of the Florida International University College of Law. But perhaps influencing his character and career direction most may have been his first job after graduating Harvard law school, where Acosta clerked for Supreme Court Justice Samuel Alito when he was a judge on the U.S. Court of Appeals for the 3rd Circuit. Justice Alito has been described as a conservative jurist with a libertarian streak; words also used at times to describe Acosta.

Later Acosta was appointed by President George W. Bush to the National Labor Relations Board (NLRB) and then served as Assistant Attorney General for Civil Rights.

While at the NLRB it was reported that Acosta usually demonstrated an independent and nonpartisan approach when evaluating cases, often voting alongside fellow Republicans in favor of employers in the major cases while also not shying from occasionally siding with unions. However, during his time in the CRD, Acosta and those working under him were deemed as having a tendency to hire more like-minded conservatives.

Looking at Acosta’s previous work experiences may suggest that he is someone who could competently execute and reinforce the broader theme of Trump’s conservative agenda. At this time, Acosta has had several major unions endorse him, and surprisingly this has not discouraged his support within the business community. As it stands now, Republicans are looking to move him through the confirmation process as swiftly as possible.

The Contractors Plan

Finding Opportunity In A Changing Landscape

January 31, 2017 Written by: Brittney Penney

Health insurance professionals have definitely felt the effects of changes brought about by the Affordable Care Act, as has the insurance industry as a whole. With some companies cutting commissions in response to medical loss ratio requirements, many brokers have seen substantial reductions in income. And while the new president has promised to make dramatic changes to the ACA, much remains to be seen about how and when those changes may take effect.

The $300 billion government-contractor market represents a huge opportunity for brokers who want to continue working in the health insurance industry. Federal contractors are required to spend a certain amount of money to provide benefits–including health insurance–to workers on contracts that fall under either the Davis- Bacon Act or the Service Contract Act. Many states and municipalities have similar laws and requirements as well.

Here are some of the advantages of working with government contractors:

  • While most know they’re required to spend a specified amount on benefits, many don’t realize that doing so results in significant savings on payroll burden and other taxes. Contractors that use these funds to pay for health insurance, dental insurance, life insurance, vision insurance, disability insurance and retirement plans–rather than including the funds as additional cash wages for their workers–can increase their profitability as a result of these savings.
  • Funds to pay for worker benefits are included in the “wage determination.”

Government contractors are required to pay workers what’s called a “prevailing wage,” which is determined by the Department of Labor and varies for each job classification on a contract. The wage determination includes both a base wage and a set amount to be spent on fringe benefits, including health insurance.

  • Savings realized by using fringe dollars to provide benefits make contractors more competitive. When contractors prepare bids for government work, every dollar counts. Contractors that use fringe dollars for benefits lower their payroll burden, in turn lowering job costs. This makes them more competitive and increases their chances of winning contracts.
  • Construction is rebounding, making employee attraction and retention even more critical. Housing starts have risen in each of the past six years, and several industry sources predict healthy advances in commercial construction as well. That means competition for skilled construction workers is tough. One way employers can differentiate themselves when it comes to attracting and retaining good workers is by offering a robust benefits program.

Help is available. There are third-party administrators that specialize in working with brokers and their government contractor customers. These TPAs can provide guidance when it comes to working with this niche market, and they can be a valuable resource when it comes to prospecting for new clients. Some providers that specialize in benefits for contractors working on Davis-Bacon Act projects handle the administration of the program for their contractor clients and offer a unique program called hour banking.

Administering health benefits for hourly employees can be very challenging. Hourly employees may not work a full week or full work year and it becomes very expensive to pay full monthly premiums for hourly employees. It is also very difficult to monitor eligibility and seasonal layoffs. One approach that many contractors will use is an hour bank, which is designed to manage the seasonality of the hourly work force and manage the true cost of employer-paid health benefits by tracking the health premiums by the hour instead of per month.

Hour banking is a way for employees to put extra hours worked (or the equivalent hourly premium) during peak construction periods into a “bank.” If there’s a slowdown in work due to weather or a lag between contracts, the employees can then draw from these banked hours and premium to extend coverage for themselves and their families. This is especially beneficial for contractors that work on projects in several states and across multiple job sites, as well as for those with employees who perform work in different job classifications. Hour banking breaks the monthly premium into an hourly rate, which makes tracking and accounting much easier for the employer. This significantly simplifies the accounting process and reduces the chance of overpayment of benefits. Having a per-hour cost for benefits is also a great strength when contractors are preparing bids.

For brokers interested in working with government contractors, the first step is learning about the Davis-Bacon Act and the Service Contract Act, as well as any state and local prevailing wage laws in your area. Partners can help you understand the basics of prevailing wage and how to develop business in the $300 billion government contractor market. The Prevailing Wage Resource Book is available on the U.S. DOL website at www.dol.gov/whd/recovery/ pwrb/toc.htm. The DOL also holds several free prevailing wage workshops throughout the country each year. The schedule can be found at www.dol.gov/whd/govcontracts/ PrevailingWageConferences.htm.

Working with government contractors provides brokers with a real opportunity to become a valued partner and resource for companies in a highly regulated environment. It’s a stable market sector with hundreds of billions of dollars of opportunity each year. And it opens up a whole new area of business with commissioned sales of health insurance, as well as opportunities to sell supplemental benefits and retirement plans.

John Allen is a regional vice president for Fringe Benefit Group, which has been helping brokers and government contractors design and administer fringe benefit programs since 1983. John joined Fringe Benefits in 2004 and has won numerous sales awards there. He graduated from the University of Kansas in 1983 and has been in sales ever since. He can be reached at 800-635-6912 or jallen@fbg.com. For more information on government contractor opportunities, visit www.thecontractorsplan.com.

America’s Benefit Specialist – Jan/Feb 2017

Finding Opportunity in a Changing Landscape

John G. Allen, CRPS

Regional Vice President
Fringe Benefit Group
Chicago, IL
jallen@fbg.com

 

 

The Contractors Plan

States Move Forward With Infrastructure Focus

January 27, 2017 Written by: Brittney Penney

While a federal infrastructure plan has been a topic of discussion of the new administration, no clear plan has yet to emerge. Despite this, many states are pressing forward with their infrastructure investment plans.

Here is a list of several states and what their efforts are focusing on:

  • Minnesota – Gov. Mark Dayton and Lt. Gov. Tina Smith introduced a Jobs Bill that would invest $1.5 billion in community infrastructure projects statewide, creating an estimated 22,950 Minnesota jobs and supporting local economies across the state.
  • Delaware – budgeted approximately $460M for infrastructure projects through 2021; adopting a Capital Improvement Program (CIP) along with a Five Year Strategic Plan.
  • Connecticut – The Connecticut Department of Transportation (CTDOT) released its $10.9 billion, five-year capital plan for fiscal years 2017-2021 covering highways, bridges, and public transportation needs; leveraging state and federal resources to advance the infrastructure programs.
  • Colorado – Governor Hickenlooper’s State of the State speech described investment in infrastructure and education as a necessity, not a luxury, and said the state needs to pay more to fund it. He also called for Colorado to chart its own course during a time when Republicans control the presidency and both houses of Congress.
  • Michigan – Governor Snyder’s State address focused on finding the funding to support statewide infrastructure spending.
  • Montana – unveiled “Employ Montana” which will rebuild infrastructure, create a marketplace for state-made products, enhance innovation, invest in jobs, and responsibly develop natural resources.

A consistent theme among the various states appears to be the question of how to fund the projects and programs that are in need. For now, it appears that states will continue to have a central role in planning and funding the nation’s road and bridge projects.

The Contractors Plan

Infrastructure Spending May Gain Attention in 2017

December 01, 2016 Written by: Brittney Penney

There has been much discussion about an infrastructure spending bill getting traction once president-elect Trump takes office. During his campaign, Trump often spoke about rebuilding the country’s infrastructure, though an exact plan is not clear.

One major feature of Trump’s plan appears to be involving the private sector. Trump has spoken about unleashing $1 trillion worth of infrastructure investment over ten years by engaging the private sector with offers of $137 billion in federal tax credits to those private investors who want to back transportation projects.

The tax credits are intended to help finance a significant share of the nation’s infrastructure needs and would serve as a critical supplement to existing financing programs, public-private partnerships, America bonds, and other funding opportunities. However, this may only work on some projects, specifically those that generate revenue.

Trump has also discussed a desire to explore new policy ideas. Establishing a national infrastructure bank is one consideration, which has been favored by Democrats. Also under consideration is the idea of taxing corporate earnings that are stored abroad when the money returns to the US and using that revenue to pay for infrastructure spending. This second option is more favored by Republicans, but regardless there appears to be a willingness to examine a variety of policy opinions.

Read more

The Contractors Plan

Overtime Department of Labor Rule Blocked, Challenge Pending.

November 23, 2016 Written by: Brittney Penney

A new rule from the Department of Labor, which would have made millions of Americans eligible for overtime pay, was blocked by a federal judge yesterday. The decision indefinitely pushes back the December 1 effective date while the judge weighs a challenge to the requirement. An estimated 4.2 million workers were to be newly eligible for time-and-a-half wages for each hour they put in beyond 40 a week under the new rule.

What does it mean for you?

This is a nationwide preliminary injunction which means no one needs to immediately comply with the changes. The Court believes rule challengers are likely to prevail on merits. The challenge will also give the new Trump administration an easy path to withdraw new rules if it wants to.

The Contractors Plan

Deadlines Extended for Furnishing Forms 1095-B and 1095-C in Early 2017

November 21, 2016 Written by: Brittney Penney

The IRS has extended the due dates for furnishing 2016 Forms 1095-B and 1095-C to covered individuals and full-time employees, respectively, from January 31, 2017, to March 2, 2017.

In addition, the IRS is also extending good faith penalty relief to reporting entities who can show they made good faith efforts to comply with the calendar year 2016 information reporting requirements.

To read the entire IRS release, Click Here.

The Contractors Plan

Recording Available of Exclusive Webinar Covering the Fair Pay Final Rule

November 16, 2016 Written by: Brittney Penney

A webinar was hosted by FBG on Tuesday, November 15th, covering the recent Fair Pay Final Rule. The webinar was presented by our partner Leslie Stout-Tabackman, who is a Principal at Jackson Lewis P.C.

She discussed what you need to know about the new regulations, how it could impact your organization, and what contractors should be doing now, including:

  • Effective dates, including phased in requirements
  • Paycheck transparency and pre-dispute arbitration agreements
  • Covered entities and contracts
  • Definitions of disclosable labor law decisions and types of violations
  • Disclosures by subcontractors
  • DOL’s new preassessment of violations invitation

 

If you were unable to attend, you can view a recording of the webinar by clicking here.

The Contractors Plan

DOL Issues Paid Sick Leave Final Rule

November 03, 2016 Written by: Brittney Penney

The U.S. Department of Labor (DOL) issued its final rule that requires federal contractors to provide paid sick leave. The sick leave final rule implements Executive Order 13706, signed by President Obama back in Sept. 2015, to require contractors to provide up to 56 hours of paid sick leave annually to their employees beginning in 2017. A covered employee can earn one hour of paid sick leave for every 30 hours worked.

The final rule allows employees to use paid leave in cases of illness or injury of the employee or a family member; the need to obtain a diagnosis or receive medical care; or the need for leave results from domestic violence, sexual assault, or stalking.

The final rule will apply to all covered contracts solicited and awarded on or after Jan. 1, 2017. Federal contracts covered by final rule include:

  • Contracts for construction covered by the Davis-Bacon Act.
  • Service contracts covered by the Service Contract Act (SCA).
  • Concessions contracts even those exempt from the SCA.
  • Contracts involving federal property or lands in which services are provided to federal employees, their dependents, or the general public.

Read more

The Contractors Plan

Understanding The Fair Pay Final Rule

October 13, 2016 Written by: Brittney Penney

On August 25, 2016, a final rule was published to implement the Fair Pay and Safe Workplaces Executive Order (EO 13673) which was signed by President Obama on July 31, 2014. The purpose of EO 13673, also referred to as “Fair Pay” or “blacklisting”, is to increase efficiency and cost savings in Federal contracting by improving contractor compliance with labor laws. Simply put, the intent of EO 13673 is to ensure that federal agencies do business with responsible contractors by encouraging the agencies to make purchasing decisions that consider the contractors’ compliance with federal and state labor laws.

The requirements needed to accomplish this goal significantly increases contractor (both prime and sub) labor law compliance disclosure, requires agencies to consider contractor compliance when making source selection decisions, and creates new agency responsibilities to assess contractor compliance and provide assistance.

Examples of federal labor laws that will be evaluated from a compliance standpoint include the Davis-Bacon Act, Service Contract Act, Fair Labor Standards Act, Family and Medical Leave Act, and many others. Compliance with similar state laws must also be considered, but these will be addressed in a future rulemaking.

The October 25, 2016, effective date will have a limited phase-in period. Contractors who work on contracts with a value of $50 million or more must start reporting any labor law violations received within one year before the start of the contract beginning October 25, 2016. The phase-in ends April 24, 2017, at which time any contracts with a value of $500,000 or more must start reporting. By October 25, 2018, there will be a three-year look back period.

Subcontractors have one additional year in which to comply. Subcontractor reporting will begin October 25, 2017. In general, reporting requirements are complicated given the phase-in, contract value differences, and one-year extension for subcontractors. Contractors should review the final rule and talk with legal counsel.  A copy of the final rule can be found at https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-19676.pdf

Efforts to enforce compliance with state and federal regulations are increasing, as evidenced by this new ruling (EO 13673).

The Contractors Plan

Why SIMPLE Plans Don’t Work For Prevailing Wage Contractors

September 28, 2016 Written by: Kevin Jackson

Deadlines are a way of life for contractors — and an important deadline is fast approaching! Does your company have a SIMPLE plan?  Did you know that they cannot be used effectively if you work on prevailing wage jobs? Employers with SIMPLE IRA or SIMPLE 401(k) plans are unable to take full advantage of the savings that can be realized from prevailing wage retirement contributions.

 

After November 1st, you are stuck with your SIMPLE plan through 2017. Written notice of intent to discontinue a SIMPLE plan must be provided to employees at least 60 days prior to the beginning of the calendar year so time is of the essence!

 

Here’s the Deal: Prevailing wage contributions made to a retirement plan reduce payroll overhead and can be leveraged in other ways to save company owners money and allow them to contribute more to their own retirement accounts.  Some contractors set up SIMPLE plans because there is no requirement for annual reporting and nondiscrimination testing but they quickly discover that a SIMPLE IRA plan is not a good fit for prevailing wage jobs. While they are relatively easy to set up, their lack of flexibility can cost you winning bids.

There are four reasons that SIMPLE plans are not appropriate for prevailing wage contractors:

  1. Contribution amounts must be identical. Contribution amounts cannot vary by project, job site or job category.  The contribution rate must be the same for all employees.
  2. Employers are prohibited from using any other type of qualified retirement plan with a SIMPLE plan. Employers who use a SIMPLE plan can only use the SIMPLE plan.   Some contractors who have existing retirement plans set up a second retirement plan specifically for prevailing wage contributions.  With a SIMPLE retirement plan, this is not allowed.
  3. Contributions are limited with a SIMPLE plan. Standard 401(k) plans allow annual deferrals up to $18,000 with an additional $6,000 allowed for employees age 50 and over.  With a SIMPLE plan, the annual deferral limit is $12,500 with an additional $3,000 allowed for employees age 50 and over.
  4. SIMPLE plans cannot help you maximize your tax savings. Because this type of plan requires that contributions for all employees be the same, employers are often prevented from contributing the entire fringe portion of the prevailing wage for job classifications with higher wage determinations.  This means companies cannot take full advantage of the potential savings on payroll burden which result from allocating the entire fringe benefit amount to bona fide benefit plans.

Transitioning from a SIMPLE Plan to a 401(k) Plan

As noted, the deadline for employers to provide notification to employees that they intend to discontinue their SIMPLE plans is November 1st.   Employers should also contact their current SIMPLE plan administrator to notify them that contributions will not be made to the plan next year.
What Type of Retirement Plan is Best?

 

So you’ve made the decision to get out of your SIMPLE plan and look for something that will be more beneficial given the amount of prevailing wage work you’re doing. For assistance in determining what type of plan will provide maximum benefits for you and your company, consult a qualified retirement plan provider with experience helping prevailing wage contractors.

 

About the author:

K.C. Cannon, Jr. is Vice President of sales at Fringe Benefit Group, which has been helping the construction industry design and administer fringe benefit programs since 1983. For more information on its prevailing wage benefit plan, The Contractors Plan, please contact K.C. at info@contractorsplan.com  or 866-670-7442.