On Service Contract Act work, the health and welfare fringe is owed employee by employee.
The wage determination in your contract sets an hourly health and welfare amount for each class of covered employee. It sits on top of the wage, a higher wage cannot satisfy it, and it is measured per person rather than across the workforce.
What the rule says, and what we do about it.
How the obligation works
- The fringe is separate from and in addition to the hourly wage in the determination, and the two are recorded separately.
- It can be met with bona fide benefits, with an equivalent cash payment, or with a combination of the two.
- It applies to all paid hours, including vacation, sick leave and holidays, up to 40 hours a week and 2,080 hours a year per contract.
- Part-time and temporary employees receive a pro-rated share based on their time on covered work.
What makes a benefit bona fide
- It sits in a plan, fund or program that is legally enforceable and primarily benefits workers.
- Contributions are made irrevocably to a trustee or other third party and cannot revert to the contractor.
- The plan is in writing and communicated to employees in writing.
- Unfunded, pay-as-incurred plans generally do not qualify, except paid vacation and holidays. Credit for one needs advance approval from the Department of Labor.
What CFH does about it
- Models plan cost for each covered employee against the fringe, so benefits carry it where they fit and cash carries it where they do not.
- Prices the plan so enrollment choices do not leave the fringe unmet.
- Reviews plan terms and employee communications against the bona fide test, alongside your counsel.
- Gives payroll the per-employee numbers it needs to record benefits and cash equivalents separately.
General information, not legal advice. Your wage determination and contract clauses govern, and contracts counsel decides how they apply to you. We bring counsel in.
Three things employers ask next.
Does paying more than the wage determination satisfy the fringe?
No. The Department of Labor’s own example: paying $25 an hour with no health and welfare benefits fails a determination of $19.50 in wages plus $4.98 in health and welfare.
Where do I find the amount?
On the wage determination attached to your contract, class by class. A national figure is published each year, but the number that binds you is the one on your determination.
Can a plan we pay claims from directly count?
Generally not. Unfunded, pay-as-incurred plans are not treated as bona fide, apart from paid vacation and holidays, unless the Department approves them in advance.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents, two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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