April showers bring May flowers, but January 2016 brings more ACA compliance

Words: John AllenIn many areas of the country, spring means a return to steady work for government contractors and a time to focus on new opportunities. While many contractors may not put “opportunity” and “Affordable Care Act” in the same sentence, the fact is that using fringe dollars on prevailing wage jobs can open up opportunities. Companies bidding and performing on work subject to the Davis-Bacon Act, state prevailing wage laws, and living and responsible wage ordinances can realize dramatic savings on their payroll expenses by allocating some or the entire required fringe benefit portion of the prevailing wage to bona fide benefit plans.

Every individual in the United States is now required to have health insurance or become subject to a penalty. While Applicable Large Employers (ALE) with 100 or more full-time employees and Full Time Equivalent Employees (FTEs) are now required to offer coverage to employees, the tide is rising for employers with 50-99 full-time employees and FTEs. The employer shared responsibility provisions of the ACA, which businesses with 100 or more full-time employees are FTEs are subject to this year, becomes effective for employers with 50-99 full-time employees and FTEs January 1, 2016. Complying with the employer mandate means employers have to anticipate which employees will work enough hours in the coming month to qualify for coverage. Companies that fail to comply with the law face significant fines.

If you work with a benefits provider that really understands the unique needs of government contractors, tracking hours to determine who needs to be covered and how many FTEs you have as it relates to the law can be simple, clean, and easy. Really. The key is to work with a benefits provider who offers hour banking, an accounting solution that solves a number of challenges government contractors face when offering bona fide benefits to their workers.

What is Hour Banking?

Hour banking is a tool that makes it possible for employees to “bank” extra hours worked during peak periods, then draw from this excess to continue health insurance coverage during slow times. When you partner with a benefits provider that specializes in Davis-Bacon contracts, administration of the program is done for you. Hour banking can be done for companies working on projects in several states, across multiple job sites and employees who perform work in different job classifications. Another key benefit of hour banking is its ability to break the monthly premium into an hourly rate, which makes tracking and accounting much easier for the employer.

How Does Hour Banking Help Me as a Business Owner?

Hour banking is a simple tool for tracking hours worked during your safe harbor period. From the standpoint of tracking premiums, hour banking helps contractors who work on both public and private jobs by distilling rates paid on both types of contracts into one hourly rate. Multiple benefits can be tracked — meaning health insurance, dental and vision insurance, and more can easily be tracked and hour banked.

How Can This Help Me with Retirement Plans?

When you work with a benefits provider who also administers retirement plans for government contractors, excess fringe dollars can be funneled into a retirement plan. This helps company owners and highly compensated employees (HCEs) by increasing the amounts they can put in their retirement account. For employees, it helps them create additional security in retirement. Some benefits providers also provide retirement loan programs, so workers can access funds in their retirement accounts in emergencies. Look for a provider who will handle the loan program for you — from setting it up to collecting payments — so you don’t have to be in the loan business.

Why Should I Do This Again?

  1. It saves you money. When you use fringe dollars to pay for bona fide benefits like health insurance, supplemental benefits, and retirement plans for your employees, those dollars are removed from payroll. That means you don’t pay FICA, FUTA, SUTA, and — in most states — workers compensation on those funds.

    Those assessments can add up to 25 cents (or more) on each dollar — per employee per hour. Over the life of a contract, that adds up to significant savings that you can use to submit leaner bids or increase your profitability.

  2. The Affordable Care Act. Starting now with an hour banking program is going to make tracking hours worked and premium paid much simpler. When you work with a provider that offers hour banking, it means the work of tracking and submitting premiums is taken off your staff and done for you.

Most government contractors are focused on ACA regulations and compliance. A benefits provider that specializes in benefits for Davis-Bacon contractors can help you sow the seeds of ACA compliance — creating more opportunities and savings for your company and your workers.
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