Industry Updates

Small Business Tax Credit Makes Using Fringe Dollars for PW Benefit Plans Even More Compelling

The Small Business Tax Credit available under the Patient Protection Act gives more urgency to the case for using the fringe to provide benefits for hourly workers:

• Reduce payroll costs
• Comply with reform
• Avoid future penalties
• Get into a preferred risk pool now / build best practices
• Given current unemployment rates, adding these benefits and taking these dollars off the payroll now is a much easier sell to employees
• Receive a 35% tax credit now, and up to a 50% tax credit by 2013. These are dollars all prevailing wage contractors have to pay anyway to some degree.

Here’s an overview of the tax credit:

Small business tax credit. The Patient Protection Act provides tax credits for small businesses and individuals designed to increase levels of health insurance coverage, as part of the IRC § 38 general business credit. Small businesses—defined as businesses with 25 or fewer employees and average annual wages of less than $50,000— are eligible for a credit of up to 50% of nonelective contributions the business makes on behalf of its employees for insurance premiums (new IRC § 45R).

Employers with 10 or fewer employees and average wages of less than $25,000 will get 100% of the credit; for other eligible employers, the credit will be reduced based on the number of employees over 10 and the excess of the employees’ average wages over $25,000. The $25,000 average annual wages figure will be indexed for inflation after 2013.

This credit is available for tax years beginning after Dec. 31, 2009, and is phased in from 2010 through 2013. During the phase-in years, the maximum credit is 35% of the employer’s eligible premium expense.

President Obama’s Four Executive Orders, A Year Later

Within a month of taking office, President Obama signed four Executive Orders dealing with labor policy relating to federal procurement. Specifically, these Executive Orders were designed to prohibit use of federal contract funds to persuade employees not to join a union, create posting requirements to explain employee rights to join a union, prevent incumbent Service Contract Act employees from being displaced when there is a change of contractors, and to encourage federal agencies to utilize project labor agreements on construction contracts valued at more than $25 million.

One year later, there has finally been some activity around implementation of these orders. Until recently, there appeared to be little evidence that the orders were being implemented in any consistent manner.

• Executive Order 13494, Economy in Government Contracting: This executive order prohibits costs related to attempts to influence employees who are deciding whether to unionize from being allowed as included or reimbursable expenses under federal contracts. In essence, its purpose is to ensure that taxpayer dollars are not used for this purpose A proposed regulation to implement this order and to amend the Federal Acquisition Regulation (FAR) was published April 15th. Comments must be filed on or before June 14, 2010.
  If you or your clients would like to comment on this Executive Order, go to www.regulations.gov and enter “FAR Case 2009-006’’ under the heading “Enter Keyword or ID’’ and selecting “Search.’’ Select the link “Submit a Comment’’ that corresponds with “FAR Case 2009-006.’’ Follow the instructions provided at the “Submit a Comment’’ screen. Please include your name, company name (if any), and “FAR Case 2009-006’’ on your attached document.
• Executive Order 13495, Nondisplacement of Qualified Workers under Service Contracts: This Executive Order requires new contractors who win an expiring service contract to offer jobs to qualified employees of their predecessor prior to advertising employment openings. This provision also applies to subcontractors. A proposed rule was published in the Federal Register March 19th. Comments regarding the proposed rule are due on or before May 18, 2010. To comment on this proposed rule, go to www.regulations.gov and search for Docket ID: DOL-2010-0001 Agency: DOL.
• Executive Order 13496, Notification of Employee Rights under Federal Labor Laws: This Executive Order requires contractors to notify employees of their unionization rights under the National Labor Relations Act. A proposed rule was issued in August of 2009, but there has been no further activity.
• Executive Order 13502, Use of Project Labor Agreements for Federal Construction Projects: This Executive Order encourages federal agencies to use project labor agreements on federal construction projects with an estimated value of $25 million or greater. The federal rule implementing provisions of the Project Labor Agreement Executive Order was published in the Federal Register April 13th. This rule takes effect May 13, 2010.

Despite the fact that final regulations were only recently published for Executive Order 13502, the US Department of Labor attempted to require the use of a PLA in its solicitation for the Manchester Job Corps Center project last year. The DOL canceled the solicitation last November after North Branch Construction, a New Hampshire based general contractor, filed a bid protest with the Government Accountability Office stating the PLA “unduly restricts competition.” In addition, several agencies tried to include non-displacement language in their new contracts as required by Executive Order 13495, but lack of necessary guidelines created confusion among contractors.

The DOL’s Wage & Hour Division (WHD) posted a notice of proposed rulemaking March 19, 2010 which describes guidelines for implementation. Highlights of the proposed rule include:

• Applies to SCA-covered contracts above the simplified acquisition threshold ($100,000)
• Employment openings under the contract may not be filled until an offer has been extended to predecessor employees
• Successor contractors may assign employees from their existing workforce to a new federal contract only if they have been employed by the company at least for three months
• Contractors are not required to offer jobs to individuals with poor performance with the predecessor contractor

Although it took nearly a year to see much progress toward implementing these executive orders, recently there has been a flurry of activity. If you are interested in commenting on the regulations to implement Executive Orders 13494 and 13495, follow the instructions above to make your opinions known.

DOT Disbursements to States $456 Million in First Half of April

According to a recent article in the Journal of Commerce Online, federal disbursements to states totaled $456 million in first half of April.

The Department of Transportation’s total spending under the economic stimulus package reached $10.893 billion as of April 16, up $456 million since the end of March.

The numbers, reported through the Recovery.gov, also show that the DOT reimbursements to states for infrastructure project work rose $195 million from the week ending April 6. The majority of the $48 billion the DOT will spend under the ARRA is allocated for highway and bridge projects—both repairs to existing structures and construction of new ones.

The article states that most of that money is already allocated, so the projects they support can proceed. Other DOT spending under the ARRA measure goes to airports for runway and building repairs, transit systems for equipment and operational support, rail system upgrades to expand passenger train use on freight rail networks and help launch two high-speed rail corridors, plus a host of multi-modal and port projects.

In addition, other government agencies from the Coast Guard to the Environmental Protection Agency are also funding some transportation projects and equipment purchases under the stimulus law.

According to the April 26 article, for all departments and all types of projects, federal agencies through mid-April have paid out $219 billion under the $787 billion stimulus law, and made $378 billion available for specific projects.

New FAQs Post ed at Recovery.gov

The answers to several new questions regarding ARRA reporting have been posted at recovery.gov. They include:

1. When will the next reports be published on Recovery.gov?
2. Where can I print my report if I used the online web-based option?
3. Do I have to add comments on my report after the agency has commented? If so, where do I enter them?
4. What is my award number?
5. What are the consequences for not submitting the report by April 10, 2010?
6. How do I [Recipient] deactivate a report?
   1. • Airports – 644.3%
      • Water and Sewage – 89.8%
      • Hospitals and Clinics – 68.5%
      • Museums – 59.9%

   NReed Construction Data: Increase in March 2010 Construction Starts Should be Viewed in Context

   A report released recently by Reed Construction Data cautions that while starts for the first quarter of 2010 are up 11.5% when compared to last year, the seasonal increase usually seen for construction starts in March did not occur. Construction starts in March 2010 increased only .7% when compared to February 2010. Economists at RCD state that given the volatility of data, this statistic may not have implications for the health of the construction industry, but add that it remains a cause for concern.

   Sectors experiencing the most significant increases in March 2010 as compared to March 2009 are:

   United HealthGroup Webinar on Healthcare Reform Available to Partners

   United HealthGroup has graciously agreed to let us make their recent webinar regarding healthcare reform available to our partners. Audio for the webinar can be downloaded here and the Powerpoint presentation can be viewed here.

   What’s New at Fringe Benefit Group

   Change in Remittance Address

   Please reach out to your clients and make them aware that effective immediately all remittances, including retirement contributions and health premiums, should be mailed to:

   Plan Benefit Services, Inc.
   Attn: Accounting
   11910 Volente Rd
   Austin, TX 78726

   Payments will be processed and funds deposited into the appropriate accounts.

   The payee on checks should be as follows:

   For retirement contributions: Contractors Retirement Plan

   For major medical premiums: Contractors Health Plan

   For Framework health premiums: Nationwide, Standard Security, or Pan American (depending on the product)

   For Total Fringe Contributions: Plan Benefit Services

   If you have clients who would prefer that we draft their account, rather than sending in a check, please have them complete a Draft Authorization form and return it to the accounting department at the address above.

   Plan Benefit Services No Longer Retains Employer Schedule A

   The “Schedule A” is part of the Plan Document’s Adoption Agreement. It lists projects, employment categories and classifications that will have prevailing wage contributions made to The Contractors Plan. The Schedule A shows hourly contribution rates for each eligible job category, and the effective date.

   Schedule A’s must be completed on all new projects, or if the contributions rates change on an existing project. This is required in order for contributions to be “bona fide” fringe benefits for prevailing wage contract purposes. The Schedule A must be completed before submitting contributions on prevailing wage projects.

   Plan Benefit Services, In. (PBS), The Contractors Plan recordkeeper, no longer requires that Schedule A’s be sent to them. Effective immediately, any Schedule A’s sent to PBS will be returned to employers to keep with their Plan Documents. Schedule A’s are an integral part of the plan document and should be kept with the Adoption Agreement for The Contractors Plan. Employers must be able to produce their Schedule A’s should they be audited by the IRS or DOL. Employers who need assistance completing their Schedule A can contact their Field Representative or the Recordkeeping Account Managers at PBS by calling (866) 457-8812 or via email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

   Betty Faul Joins Fringe Benefit Group’s Team in the Northeast

   Please welcome Betty Faul, Benefit Plan Consultant, to the team. She will be working with Karen deMontigny, Christine Lawrence and Brian Renaud doing client service, plan reviews, and enrollment meetings. Betty has extensive experience, particularly in the area of retirement plan compliance.

   Fringe Benefit Group Featu red in Agent’s Sales Journal

   The May issue of Agent’s Sales Journal features an article written by Fringe Benefit Group’s Vice President of SCA Markets, Bill Henson, explaining the opportunities available for benefits specialists as a result of the ARRA. Read the article here.

   Trade Show Schedule

   ICAA Convention
   Chicago, Illinois
   June 11th, 2010
   Presenting Friday, June 11th – 11:00 a.m.

   CFMA Annual Conference
   Hawaii
   June 26-30, 2010

   The Construction Industry CPAs/Consultants Association (CICPAC)
   Chicago, Illinois
   Embassy Suites Lakefront
   July 14-16, 2010
   Presenting

   7th Annual National Veteran Small Business Conference & Expo Las Vegas July 19 - 22, 2010

   WorkComp Advisory Group
   1st Annual Educational Emporium-Knowledge & Networking 2010
   Chicago, Illinois
   The Renaissance Blackstone Hotel
   September 15th – 17th, 2010
   Presenting September 17th

   ICAA Convention & Tradeshow
   Las Vegas, Nevada
   Red Rock Resort
   September 23rd-25th, 2010

   We sincerely thank you for partnering with us and we appreciate your business. If you have ideas or suggestions for how we can help you be more successful, please let us know.