A Bona Fide fringe is specifically defined in the Prevailing Wage regulations as the only type of fringe that may count towards the required Prevailing Wage rate. This article is primarily for work subject to the Davis Bacon Act, most state prevailing wage projects, and contractors that perform a mix of work.
Bona Fide fringes are limited to:
Insurance. Defined as medical or hospital care, life insurance, disability and sickness insurance or accident insurance. Any employer paid insurance required by law, such as workman’s compensation or unemployment insurance, cannot be counted as a prevailing wage required fringe. Bona Fide insurance, for fringe purposes, is solely for the benefit of the employee or his dependents.
Holiday and Vacation Pay (Paid Time Off). Is specifically allowed by law if calculated and funded in a way that complies with the other listed requirements. This is frequently a very large expense incurred by the employer where no Prevailing Wage credit is taken.
Pensions on Retirement. Contributions to a properly designed 401k Pension Plan can be used to deposit any or all of the required fringes on a Prevailing Wage project and may be used to offset other Retirement Plan contributions. Because these are defined as Company contributions, and not as employee deferrals, there is no additional wage related burden. It is important to have a third party who is well versed on Prevailing Wage requirements, as well as the construction industry in general, to assist in the implementation of the pension plan. Too many times a contractor accepts a “standard” plan while not being fully aware of all the options available.
Apprenticeship Program. Defraying the cost of an Apprenticeship Program is considered Bona Fide if the program is properly registered and approved with the appropriate governmental agency. Specific guidelines are to be followed in determining the amount of the fringe that is allowable as a credit. Any contractor with such a program should seek guidance from a knowledgeable party when determining this amount.
Other Approved Fringe. Defined as any fringe not otherwise described above. 29 CFR 5.29 (e) states “. . . it will be necessary for the Secretary to examine the facts and circumstances to determine whether they are Bona Fide in accordance with requirements of the act . . . Contractors or subcontractors seeking credit under the act for costs incurred for such plans must request specific permission from the Secretary under 5.5(a)(1)(iv)”. If the contractor desires a furnished fringe be allowable as part of the required Prevailing Wage rate, specific approval must be requested from the DOL.
Cash. Cash, in lieu of fringe, is always acceptable. However, any Prevailing Wage fringe amount paid in cash shall be paid as regular wages and is subject to the associated labor related burden (matching FICA, unemployment, workman’s comp, liability insurance, etc.).
It is important to note that receiving credit for a bona fide fringe is just one of 5 Things a contractor must do to be in compliance and receive maximum allowable credit for fringes paid on a Prevailing Wage project.