(a) Determining the required amount of benefits. (1) Most fringe
benefit determinations containing health and welfare and/or pension
requirements specify a fixed payment per hour on behalf of each service
employee. These payments are usually also stated as weekly or monthly
amounts. As set forth in Sec. 4.172, unless specified otherwise in the
applicable determination such payments are due for all hours paid for,
including paid vacation, sick leave, and holiday hours, up to a maximum
of 40 hours per week and 2,080 hours per year on each contract. The
application of this rule can be illustrated by the following examples:
(i) An employee who works 4 days a week, 10 hours a day is entitled
to 40 hours of health and welfare and/or pension fringe benefits. If an
employee works 3 days a week, 12 hours a day, then such employee is
entitled to 36 hours of these benefits.
(ii) An employee who works 32 hours in a workweek and also receives
8 hours of holiday pay is entitled to the maximum of 40 hours of health
and welfare and/or pension payments in that workweek. If the employee
works more than 32 hours and also received 8 hours of holiday pay, the
employee is still only entitled to the maximum of 40 hours of health and
welfare and/or pension payments.
(iii) If an employee is off work for two weeks on vacation and
received 80 hours of vacation pay, the employee must also receive
payment for the 80 hours of health and welfare and/or pension benefits
which accrue during the vacation period.
(iv) An employee entitled to two weeks paid vacation who instead
works the full 52 weeks in the year, receiving the full 2,080 hours
worth of health and welfare and/or pension benefits, would be due an
extra 80 hours of vacation pay in lieu of actually taking the vacation;
however, such an employee would not be entitled to have an additional 80
hours of health and welfare and/or pension benefits included in his
vacation pay.
(2) A fringe benefit determination calling for a specified benefit
such as health insurance contemplates a fixed and definite contribution
to a ``bona fide'' plan (as that term is defined in Sec. 4.171) by an
employer on behalf of each employee, based on the monetary cost to the
employer rather than on the level of benefits provided. Therefore, in
determining compliance with an applicable fringe benefit determination,
the amount of the employer's contribution on behalf of each individual
employee governs. Thus, as set forth in Sec. 4.172, if a determination
should require a contribution to a plan providing a specified fringe
benefit and that benefit can be obtained for less than the required
contribution, it would be necessary for the employer to make up the
difference in cash to the employee, or furnish equivalent benefits, or a
combination thereof. The following illustrates the application of this
principle: A fringe benefit determination requires a rate of $36.40 per
month per employee for a health insurance plan. The employer obtains the
health insurance coverage specified at a rate of $20.45 per month for a
single employee, $30.60 for an employee with spouse, and $40.90 for an
employee with a family. The employer is required to make up the
difference in cash or equivalent benefits to the first two classes of
employees in order to satisfy the determination, notwithstanding that
coverage for an employee would be automatically changed by the employer
if the employee's status should
change (e.g., single to married) and notwithstanding that the employer's
average contribution per employee may be equal to or in excess of $36.40
per month.
(3) In determining eligibility for benefits under certain wage
determinations containing hours or length of service requirements (such
as having to work 40 hours in the preceding month), the contractor must
take into account time spent by employees on commercial work as well as
time spent on the Government contract.
(b) Some fringe benefit determinations specifically provide for
health and welfare and/or pension benefits in terms of average cost.
Under this concept, a contractor's contributions per employee to a
``bona fide'' fringe benefit plan are permitted to vary depending upon
the individual employee's marital or employment status. However, the
firm's total contributions for all service employees enrolled in the
plan must average at least the fringe benefit determination requirement
per hour per service employee. If the contractor's contributions average
less than the amount required by the determination, then the firm must
make up the deficiency by making cash equivalent payments or equivalent
fringe benefit payments to all service employees in the plan who worked
on the contract during the payment period. Where such deficiencies are
made up by means of cash equivalent payments, the payments must be made
promptly on the following payday. The following illustrates the
application of this principle: The determination requires an average
contribution of $0.84 an hour. The contractor makes payments to bona
fide fringe benefit plans on a monthly basis. During a month the firm
contributes $15,000 for the service employees employed on the contract
who are enrolled in the plan, and a total of 20,000 man-hours had been
worked by all service employees during the month. Accordingly, the
firm's average cost would have been $15,000/20,000 hours or $0.75
per hour, resulting in a deficiency of $0.09 per hour. Therefore, the
contractor owes the service employees in the plan who worked on the
contract during the month an additional $0.09 an hour for each hour
worked on the contract, payable on the next regular payday for wages.
Unless otherwise provided in the applicable wage determination,
contributions made by the employer for non-service employees may not be
credited toward meeting Service Contract Act fringe benefit obligations.
(c) Employees not enrolled in or excluded from participating in
fringe benefit plans. (1) Some health and welfare and pension plans
contain eligibility exclusions for certain employees. For example,
temporary and part-time employees may be excluded from participating in
such plans. Also, employees receiving benefits through participation in
plans of an employer other than the Government contractor or by a
spouse's employer may be prevented from receiving benefits from the
contractor's plan because of prohibitions against ``double coverage''.
While such exclusions do not invalidate an otherwise bona fide insurance
plan, employer contributions to such a plan cannot be considered to be
made on behalf of the excluded employees. Accordingly, under fringe
benefit determination requirements as described in paragraph (a)(2) of
this section, the employees excluded from participation in the health
insurance plan must be furnished equivalent bona fide fringe benefits or
be paid a cash equivalent payment during the period that they are not
eligible to participate in the plan.
(2) It is not required that all employees participating in a fringe
benefit plan be entitled to receive benefits from that plan at all
times. For example, under some plans, newly hired employees who are
eligible to participate in an insurance plan from their first day of
employment may be prohibited from receiving benefits from the plan
during a specified ``waiting period''. Contributions made on behalf of
such employees would serve to discharge the contractor's obligation to
furnish the fringe benefit. However, if no contributions are made for
such employees, no credit may be taken toward the contractor's fringe
benefit obligations.
(d) Payment of health and welfare and pension benefits. (1) Health
and welfare and/or pension payments to a ``bona fide'' insurance plan or
trust program may be made on a periodic payment
basis which is not less often than quarterly. However, where fringe
benefit determinations contemplate a fixed contribution on behalf of
each employee, and a contractor exercises his option to make hourly cash
equivalent or differential payments, such payments must be made promptly
on the regular payday for wages. (See Sec. 4.165.)
(2) The rules and regulations for furnishing health and welfare and
pension benefits to temporary and part-time employees are discussed in
Sec. 4.176.
(3) The rules and regulations for furnishing equivalent fringe
benefits or cash equivalents in lieu of health and welfare and pension
benefits are discussed in Sec. 4.177.
