The Infrastructure Investment and Jobs Act (2021) and the Inflation Reduction Act (2022) provide ample opportunity for construction industry employers to win government contracts. For some employers, one hindrance to competing for government construction contracts is that under the Davis-Bacon Act, all government construction-related contracts require employers to pay their laborers and mechanics not less than the prevailing wage and fringe benefits. Often, employers who have chosen to provide self-funded benefits struggle to have such benefits credited toward the fringe benefit requirement.

However, for those employers offering self-funded health and welfare benefits, there are options to credit such benefits toward the prevailing wage requirements by qualifying the plan as a “bone fide” fringe benefit plan. One way to qualify as a bone fide fringe benefit plan under 29 C.F.R. 4.171 is for the employer to make an irrevocable contribution to cover potential benefits under the plan to a trust controlled by either a voluntary employees’ beneficiary association (VEBA) or an independent trustee.  However, making such contributions is irreversible and forces the employer sponsoring the plan to give up the flexibility to pay claims out of their general assets as they arise, which is often one of the attractions of a self-funded plan. Another option is to submit to the U.S. Department of Labor (DOL) an application requesting a determination that the plan is a bona fide fringe benefit plan under the Davis-Bacon Act.  The process is straightforward and efficient, requiring the employer to gather and provide information showing that the plan satisfies the usual requirements for a welfare plan under ERISA.  In most cases, the required information is readily available to the employer.  Upon approval by the DOL, payments under the approved plan can be credited toward prevailing wage requirements.

If you or your organization would like to explore the possibility of having a self-funded plan qualified and credited toward prevailing wage requirements through either a trust or formal approval, we can help. 

For more information or any questions regarding plan compliance and operations, please contact Matt Secrist, Jeff Mullins or Amelia Trefz.

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Photo of Matthew A. Secrist Matthew A. Secrist

Matthew focuses his practice on employee benefits and executive compensation matters. He is experienced in a wide range of employee benefits matters, including tax qualified retirement plans (401(k) plans, pension plans, employee stock ownership plans (“ESOPs”), etc.), nonqualified deferred compensation plans and arrangements…

Matthew focuses his practice on employee benefits and executive compensation matters. He is experienced in a wide range of employee benefits matters, including tax qualified retirement plans (401(k) plans, pension plans, employee stock ownership plans (“ESOPs”), etc.), nonqualified deferred compensation plans and arrangements, welfare benefit plans, COBRA, HIPAA, and Affordable Care Act issues. Matthew also advises clients regarding compliance with Internal Revenue Code Sections 280G and 409A. His executive compensation experience includes employee fringe benefit plans, stock option plans, supplemental executive retirement plans (SERPs), employment agreements, severance plans, and various other forms of incentive compensation arrangements.

In addition to assisting employers with day-to-day employee benefits-related matters, Matthew has guided employers through cases where the employer participated in a distressed multiple employer welfare arrangement (MEWA) where a court appoints a receiver/independent fiduciary to oversee plan liquidation and payment of employee medical claims. Matthew also counsels clients on employee benefit matters in employer bankruptcies.

Matthew advises tax-exempt entities from formation to termination, and represents clients in controversy proceedings before the IRS and the Department of Labor.

Photo of Amelia Trefz Amelia Trefz

Amelia is an associate in Taft’s Indianapolis office and focuses her practice on executive compensation and employee benefits. She has a wide breadth of experience in mergers & acquisitions, negotiating and drafting various commercial contracts, private equity transactions, employment law compliance and executive…

Amelia is an associate in Taft’s Indianapolis office and focuses her practice on executive compensation and employee benefits. She has a wide breadth of experience in mergers & acquisitions, negotiating and drafting various commercial contracts, private equity transactions, employment law compliance and executive compensation matters.

Prior to joining Taft, Amelia was a transactional associate at a well-known New York City firm where she worked with clients clients on complex legal issues related to employment, securities and employee equity, IRS and DOL audits, privacy and confidentiality arrangements, and investigations arising from compensation and employee benefit plans.

Amelia earned her J.D. from Vanderbilt University Law School and her bachelor’s degree, with honors, in marketing from Indiana University. While Amelia was in law school, she was a legal intern for the U.S. Department of Housing and Urban Development in Nashville, TN, where she worked closely with the TN Chief Counsel on legal matters, financial transactions, multifamily insured mortgages and changes in ownership.