Federal contractors carry extra employment duties, and some are about benefits.
Employers with federal contracts face affirmative action rules for people with disabilities and protected veterans, and prevailing-wage rules that can require fringe benefits. The rules changed in 2026.
The basics for employers.
Below is a plain-language walk-through for orientation. It stops short of legal advice, and the regulations it summarizes can be amended.
Section 503
Contractors with covered federal contracts must not discriminate against qualified individuals with disabilities. OFCCP’s final rules published in August 2026 raise the coverage threshold from $15,000 to $20,000 and end the requirement to invite self-identification, effective September 21, 2026.
VEVRAA
Covered contractors must take affirmative action for protected veterans. The rules keep self-identification, and raise coverage thresholds from $150,000 to $200,000, effective September 21, 2026.
Prevailing Wage and Fringe Benefits
The Service Contract Act and Davis-Bacon Act require covered contractors to pay prevailing wages and fringe benefits, which can be satisfied with cash or bona fide plan contributions.
How compliance plays out.
Confirm whether you are a federal contractor or subcontractor and which threshold applies. A single contract can bring in the whole company’s obligations under some rules.
Executive Order 11246 was revoked in 2025, and the August 2026 final rules rescind its implementing regulations, effective October 26, 2026. Section 503 and VEVRAA affirmative action obligations still apply, apart from the changes above.
For covered service or construction contracts, compare the wage determination’s fringe benefit rate to your benefit plan costs. Contributions to a bona fide plan can be credited toward the required fringe amount if they meet the rules.
Keep records, post required notices and monitor the Department of Labor for updates, because this area is in flux.
Where this shows up in your plan.
Fringe Benefit Credit
Employer contributions to bona fide health and welfare plans may count toward required fringe amounts.
Eligibility and Waiting Periods
A plan’s waiting period may affect the credit and should be checked against the contract terms.
Affordability and ACA
Meeting a fringe rate does not satisfy ACA affordability on its own.
Setting it up.
Inventory federal contracts and subcontracts and their thresholds.
Review Section 503 and VEVRAA policies in light of the 2026 changes.
Compare wage determination fringe rates to plan contributions.
Update handbooks and postings.
Calendar a yearly review of contractor obligations.
Mistakes to avoid.
Relying on old thresholds after the September 2026 effective date.
Assuming benefit costs automatically satisfy a fringe benefit rate.
Overlooking subcontractor flow-down duties.
Dropping policies before confirming what still applies.
Other rules employers work with.
Pay Equity and Pay Discussions
Federal and Michigan rules.
ADA and Religious Accommodations
Disability accommodation.
Form I-9 and E-Verify
Work authorization.
Laws and Rules Referenced
Section 503 of the Rehabilitation Act, 29 U.S.C. 793 — Federal contractor obligations for individuals with disabilities.
VEVRAA, 38 U.S.C. 4212 — Affirmative action for protected veterans.
Service Contract Labor Standards, 41 U.S.C. 6701 et seq. — Prevailing wages and fringe benefits on service contracts.
Davis-Bacon Act, 40 U.S.C. 3141 et seq. — Prevailing wages and fringe benefits on federal construction.
Office of Federal Contract Compliance Programs — Agency guidance and current rules.
Quick answers.
Frequent employer questions, answered in brief, with the in-depth guide one click away from each reply.
Who is a federal contractor?
A business with a covered federal contract or subcontract above the relevant threshold.
Is Executive Order 11246 still in effect?
It was revoked in 2025, and OFCCP’s 2026 final rules rescind its regulations, effective October 26, 2026.
Did Section 503 change in 2026?
Yes. The coverage threshold rose to $20,000 and the self-identification requirement ended, effective September 21, 2026.
Can benefit costs count toward a fringe benefit rate?
Contributions to a bona fide plan may be credited if they meet the contract and regulatory rules.
Where do I check the current rules?
The Department of Labor and OFCCP websites publish current rules and updates.
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