(a) Statutory provision. Section 7(e)(4) of the Act provides that
the term ``regular rate'' shall not be deemed to include:
``contributions irrevocably made by an employer to a trustee or third
person pursuant to a bona fide plan for providing old age, retirement,
life, accident, or health insurance or similar benefits for employees *
* *.'' Such sums may not, however, be credited toward overtime
compensation due under the Act.
(b) Scope and application of exclusion generally. Plans for
providing benefits of the kinds described in section 7(e)(4) are
referred to herein as ``benefit plans''. It is section 7(e)(4) which
governs the status for regular rate purposes of any contributions made
by an employer pursuant to a plan for providing the described benefits.
This is true irrespective of any other features the plan may have. Thus,
it makes no difference whether or not the benefit plan is one financed
out of profits or one which by matching employee contributions or
otherwise encourages thrift or savings. Where such a plan or trust is
combined in a single program (whether in one or more documents) with a
plan or trust for providing profit-sharing payments to employees, the
profit-sharing payments may be excluded from the regular rate if they
meet the requirements of the Profit-Sharing Regulations, part 549 of
this chapter, and the contributions made by the employer for providing
the benefits described in section 7(e)(4) of the Act may be excluded
from the regular rate if they meet the tests set forth in Sec. 778.215.
Advance approval by the Department of Labor is not required.
(c) Tests must be applied to employer contributions. It should be
emphasized that it is the employer's contribution made pursuant to the
benefit plan that is excluded from or included in the regular rate
according to whether or not the requirements set forth in Sec. 778.215
are met. If the contribution is not made as provided in section 7(e)(4)
or if the plan does not qualify as a bona fide benefit plan under that
section, the contribution is treated the same as any bonus payment which
is part of the regular rate of pay, and at the time the contribution is
made the amount thereof must be apportioned back over the workweeks of
the period during which it may be said to have accrued. Overtime
compensation based upon the resultant increases in the regular hourly
rate is due for each overtime hour worked during any workweek of the
period. The subsequent distribution of accrued funds to an employee on
account of severance of employment (or for any other reason) would not
result in any increase in his regular rate in the week in which the
distribution is made.
(d) Employer contributions when included in fringe benefit wage
determinations under Davis-Bacon Act. As noted in Sec. 778.6 where
certain fringe benefits are
included in the wage predeterminations of the Secretary of Labor for
laborers and mechanics performing contract work subject to the Davis-
Bacon Act and related statutes, the provisions of Public Law 88-349
discussed in Sec. 5.32 of this title should be considered together with
the interpretations in this part 778 in determining the excludability of
such fringe benefits from the regular rate of such employees.
Accordingly, reference should be made to Sec. 5.32 of this title as well
as to Sec. 778.215 for guidance with respect to exclusion from the
employee's regular rate of contributions made by the employer to any
benefit plan if, in the workweek or workweeks involved, the employee
performed work as a laborer or mechanic subject to a wage determination
made by the Secretary pursuant to part 1 of this title, and if fringe
benefits of the kind represented by such contributions constitute a part
of the prevailing wages required to be paid such employee in accordance
with such wage determination.
(e) Employer contributions or equivalents pursuant to fringe benefit
determinations under Service Contract Act of 1965. Contributions by
contractors and subcontractors to provide fringe benefits specified
under the McNamara-O'Hara Service Contract Act of 1965, which are of the
kind referred to in section 7(e)(4), are excludable from the regular
rate under the conditions set forth in Sec. 778.215. Where the fringe
benefit contributions specified under such Act are so excludable,
equivalent benefits or payments provided by the employer in satisfaction
of his obligation to provide the specified benefits are also excludable
from the regular rate if authorized under part 4 of this title, subpart
B, pursuant to the McNamara-O'Hara Act, and their exclusion therefrom is
not dependent on whether such equivalents, if separately considered,
would meet the requirements of Sec. 778.215. See Sec. 778.7.
[33 FR 986, Jan. 26, 1968, as amended at 36 FR 4699, Mar. 11, 1971]
