Prevailing wage supplemental benefits are the non-cash compensation that contractors must provide to workers on government-funded construction and service projects. These benefits sit on top of the basic hourly wage and include things like health insurance, pension contributions, vacation pay, and life insurance. Under federal law (40 U.S.C. § 3141), every contractor on a covered project must pay the full prevailing wage, which is the basic hourly rate plus the supplemental benefit amount listed on the wage determination.
Failing to pay supplemental benefits is one of the most common violations on public works projects. The U.S. Department of Labor recovered over $30.8 million in back wages for construction workers in a single fiscal year. Contractors who skip or miscalculate these benefits face back-pay orders, civil penalties of $5,000 per affected worker per year, and even debarment from government contracts for up to five years.
Here is what you will learn in this article:
- 💰 How supplemental benefits are calculated and what counts as a “bona fide” fringe benefit under the Davis-Bacon Act
- 📋 How to report fringe benefits on the WH-347 certified payroll form without making costly mistakes
- ⚖️ The difference between paying benefits in cash versus contributing to a benefit plan — and the tax consequences of each
- 🏗️ State-level rules in New York, California, and other states that add extra layers of compliance
- 🚨 The specific mistakes that trigger DOL investigations, penalties, and debarment
How the Davis-Bacon Act Creates the Supplemental Benefit Obligation
The Davis-Bacon Act of 1931 is the federal law that requires contractors on federally funded construction projects worth more than $2,000 to pay prevailing wages. The prevailing wage has two parts: the basic hourly rate (BHR) and the fringe benefit rate. Both appear on the wage determination issued for each project.
The fringe benefit portion is the supplemental benefit. It represents the hourly dollar value of benefits like health coverage, retirement plans, and paid leave that workers in that trade and location typically receive. The DOL sets these rates through surveys of wages and benefits paid in the area where the work takes place.
Why “Supplemental” Matters More Than You Think
The word supplemental signals that these benefits are separate from and in addition to the base wage. A contractor cannot simply pay a higher hourly cash wage and claim the fringe obligation is covered — unless the cash payment specifically exceeds the basic hourly rate listed on the wage determination. Under 29 CFR § 5.31, cash paid above the BHR can offset the fringe benefit portion, but only on DBRA-covered work.
This distinction carries real consequences for overtime calculations. Cash paid in lieu of fringe benefits is excluded from the overtime premium under the Fair Labor Standards Act. If a worker earns $27.00/hour base pay and gets $14.00/hour as cash in lieu of fringes, the overtime rate applies only to the $27.00 — not the full $41.00. Getting this wrong inflates payroll costs or creates underpayment violations.
The Two-Part Prevailing Wage Formula
Every wage determination breaks the prevailing wage into two numbers. The total obligation is the sum of both.
| Component | Example Amount |
|---|---|
| Basic Hourly Rate (BHR) | $27.00/hour |
| Fringe Benefit Rate | $14.00/hour |
| Total Prevailing Wage | $41.00/hour |
A contractor can meet this $41.00 obligation in three ways. First, the contractor can pay $41.00 entirely in cash. Second, the contractor can pay $27.00 in cash and provide $14.00 in bona fide fringe benefits. Third, the contractor can use any combination — for example, $35.00 in cash and $6.00 in bona fide fringe benefits.
What Counts as a “Bona Fide” Fringe Benefit
Not every benefit a contractor offers qualifies for credit against the prevailing wage. The Davis-Bacon Act uses the term bona fide to describe benefits that meet specific legal standards. A benefit must be part of a legally enforceable plan, fund, or program and must comply with ERISA, IRS rules, and state insurance laws.
The DBA lists several examples of bona fide fringe benefits. These are common in the construction industry and reflect the types of compensation that workers in a given trade typically receive.
Benefits That Qualify
- Medical, dental, and vision insurance
- Life insurance
- Disability insurance
- Pension and retirement plans (401(k), defined benefit, defined contribution)
- Vacation pay
- Holiday pay
- Apprenticeship and training programs (if registered with DOL or a recognized State Apprenticeship Agency)
Benefits That Do NOT Qualify
Several types of employer costs cannot be credited toward the fringe benefit obligation. Understanding these exclusions prevents compliance failures.
| Does NOT Qualify | Why It Fails |
|---|---|
| Workers’ compensation insurance | Required by state law — 29 CFR § 5.29(f) bars credit for legally mandated benefits |
| Social Security (FICA) contributions | Required by federal law |
| Transportation and travel expenses | Considered for the contractor’s convenience, not a fringe benefit |
| Board and lodging | Governed by FLSA, not creditable under DBRA |
| Company cell phones or vehicles | Personal-use perks, not fringe benefits |
| Contractor’s administrative expenses | Costs of running the benefit plan belong to the contractor |
| Paid sick leave under Executive Order 13706 | Federally mandated — not creditable |
The administrative expense rule trips up many contractors. If a contractor pays a third-party administrator to manage health insurance claims, that fee is not creditable. The DOL’s Fact Sheet #66E spells this out: tasks like filling out insurance forms, tracking invoices, and updating personnel records are the contractor’s own costs.
Funded vs. Unfunded Fringe Benefit Plans
The DOL draws a sharp line between funded and unfunded fringe benefit plans. Each type has different rules, and choosing the wrong approach without following the correct steps leads to violations.
How Funded Plans Work
A funded plan involves irrevocable contributions to a trustee or third party that is not connected to the contractor. The contractor sends money to an insurance company, a union trust fund, or a 401(k) administrator. Once the money leaves the contractor’s hands, it cannot be taken back or redirected to the contractor’s benefit.
Funded plans are the simpler path. Contractors can claim credit for contributions to these plans without requesting DOL approval, as long as contributions are made at least quarterly and the plan meets ERISA and IRS requirements. The trustee must carry standard fiduciary duties, and the fund cannot allow the contractor to recapture contributions.
How Unfunded Plans Work
An unfunded plan is paid from the contractor’s general assets. Many vacation and sick leave plans in the construction industry work this way — the contractor pays workers for time off out of its operating funds rather than through a separate trust.
Unfunded plans require prior written approval from the DOL’s Wage and Hour Division. The contractor must submit a request to [email protected] or mail it to the Division of Government Contracts Enforcement in Washington, D.C. The plan must be communicated to workers in writing, and the contractor must set aside enough money to guarantee the benefits will be available when workers become eligible.
Skipping this approval step is a common violation. A contractor who runs an unfunded vacation plan without DOL approval gets zero credit toward the fringe benefit obligation — even if workers actually receive the vacation pay.
| Plan Type | Key Requirement |
|---|---|
| Funded (e.g., 401(k), health insurance trust) | Irrevocable contributions to a third party; no DOL pre-approval needed |
| Unfunded (e.g., vacation from general assets) | Must get DOL written approval before claiming credit |
The Annualization Principle: Where Most Contractors Get Tripped Up
Annualization is the DOL’s method for figuring out how much hourly credit a contractor can claim for a fringe benefit. It prevents contractors from using DBRA projects as the sole funding source for benefits that cover all of a worker’s hours — both government and private.
How Annualization Works
The formula is straightforward: take the total annual cost of the fringe benefit for a specific worker and divide it by the total hours that worker works during the year — on both DBRA and non-DBRA projects. The result is the hourly credit the contractor can claim.
Say a contractor pays $10,400 per year for a worker’s health insurance. That worker logs 2,080 total hours in the year (1,040 on a Davis-Bacon project and 1,040 on private work). The hourly credit is $10,400 ÷ 2,080 = $5.00/hour. The contractor can only claim $5.00/hour against the fringe obligation on the DBRA project — not the full cost.
Why Annualization Catches Contractors Off Guard
Many contractors make the mistake of dividing the benefit cost by only the DBRA hours. Using the example above, dividing $10,400 by 1,040 DBRA hours would produce a credit of $10.00/hour — double the correct amount. This error creates an underpayment violation because the contractor claims more credit than allowed and pays less cash to make up the difference.
| Calculation Method | Compliant? |
|---|---|
| $10,400 ÷ 2,080 total hours = $5.00/hour | ✅ Yes |
| $10,400 ÷ 1,040 DBRA hours only = $10.00/hour | ❌ No — overstates credit |
Exceptions to Annualization
The DOL grants exceptions for benefits that are not continuous in nature and do not cover both DBRA and non-DBRA work. Defined contribution pension plans with immediate participation and essentially immediate vesting (within the first 500 hours worked) are automatically excepted from annualization under 29 CFR § 5.29(g). All other exception requests must be submitted in writing to the Wage and Hour Division.
Paying Fringe Benefits in Cash vs. Through a Benefit Plan
Contractors face a strategic choice: pay the fringe benefit amount as cash in lieu of benefits, or contribute to an actual benefit plan. Each path carries different tax, compliance, and cost implications.
Cash in Lieu of Fringe Benefits
When a contractor pays the fringe amount as cash wages, the payment goes directly into the worker’s paycheck. If the wage determination requires $27.00 BHR + $14.00 fringe, the contractor can pay $41.00/hour in straight cash. The worker gets more take-home pay, and the contractor avoids the complexity of managing benefit plans.
The downside is taxes. Cash fringe payments are treated as taxable wages. The contractor must pay FICA (Social Security and Medicare), federal and state unemployment taxes, and workers’ compensation premiums on the full $41.00. These payroll taxes can add 25% or more to the contractor’s labor costs compared to routing the fringe dollars through a benefit plan.
Contributing to a Benefit Plan
When a contractor pays the fringe amount into a bona fide benefit plan — such as a group health insurance policy or a 401(k) — those contributions are generally not subject to payroll taxes. The worker receives the benefit (health coverage, retirement savings) but does not pay income tax on the employer’s contribution at the time it is made.
This approach saves the contractor money on every hour worked. On a large project with hundreds of workers, the tax savings from using benefit plans instead of cash can reach tens of thousands of dollars.
Side-by-Side Comparison
| Factor | Cash in Lieu |
|---|---|
| Subject to FICA taxes | Yes |
| Subject to unemployment taxes | Yes |
| Workers’ comp premium impact | Increases premium base |
| Worker receives immediate cash | Yes |
| Administrative complexity | Low |
| DOL credit toward fringe obligation | Full credit if paid to worker |
| Factor | Benefit Plan Contribution |
|---|---|
| Subject to FICA taxes | No (for most qualified plans) |
| Subject to unemployment taxes | No |
| Workers’ comp premium impact | Does not increase premium base |
| Worker receives immediate cash | No — receives benefit coverage |
| Administrative complexity | Higher — must manage plan compliance |
| DOL credit toward fringe obligation | Full credit if plan is bona fide |
Three Real-World Scenarios
Scenario 1: Maria the Electrician — All Cash Payment
Maria works as a journeyworker electrician on a federal highway project. The wage determination lists a BHR of $38.50 and a fringe benefit rate of $16.75, for a total prevailing wage of $55.25/hour. Her employer does not offer any benefit plans and pays Maria $55.25/hour in cash wages.
| Decision | Result |
|---|---|
| Employer pays $55.25/hour all in cash | Maria gets full amount in her paycheck |
| Employer owes payroll taxes on $55.25 | FICA, unemployment, and workers’ comp apply to entire amount |
| Fringe obligation satisfied? | Yes — cash payment meets total prevailing wage |
| Overtime rate calculated on | $38.50 BHR only (the $16.75 cash-in-lieu portion is excluded) |
Maria’s employer stays compliant, but the tax burden is steep. Every hour Maria works costs the employer far more than $55.25 once payroll taxes and workers’ comp premiums are factored in.
Scenario 2: James the Plumber — Combination Approach
James works for a plumbing contractor on a federally funded school construction project. The wage determination requires $32.00 BHR + $15.00 fringe. The contractor provides health insurance worth $8.00/hour (after annualization) and a 401(k) contribution worth $3.00/hour. That leaves a $4.00/hour gap in the fringe obligation.
| Decision | Result |
|---|---|
| Health insurance credit: $8.00/hour | Credited toward fringe obligation |
| 401(k) contribution: $3.00/hour | Credited toward fringe obligation |
| Remaining gap: $4.00/hour | Must be paid as cash in lieu of fringe benefits |
| James receives in cash | $32.00 BHR + $4.00 cash-in-lieu = $36.00/hour |
This combination approach saves the contractor money on payroll taxes for the $11.00/hour routed through benefit plans while still meeting the full prevailing wage obligation.
Scenario 3: Angela the Carpenter — The Annualization Trap
Angela works for a general contractor that splits time between Davis-Bacon projects and private residential work. Her employer pays $12,000/year for Angela’s health insurance. Angela works 2,000 total hours per year — 800 on DBRA projects and 1,200 on private jobs. The wage determination requires a $14.00/hour fringe rate.
| Decision | Result |
|---|---|
| Correct annualization: $12,000 ÷ 2,000 = $6.00/hour credit | Contractor must pay $8.00/hour cash to fill the gap |
| Wrong calculation: $12,000 ÷ 800 DBRA hours = $15.00/hour credit | Contractor claims full fringe is covered — violation |
| Consequence of wrong calculation | Underpayment of $8.00/hour × 800 hours = $6,400 in back wages owed |
Angela’s employer thought the health plan covered the full fringe obligation. The annualization rule exposed a $6,400 underpayment. The contractor now owes back wages plus potential penalties of $5,000 per worker per year.
How to Report Fringe Benefits on the WH-347 Certified Payroll Form
The WH-347 form is the certified payroll report that contractors must submit weekly on DBRA-covered projects. The form was updated in 2025 to add more detailed fringe benefit reporting. Getting it right protects the contractor from audit findings and back-wage claims.
Key Columns for Fringe Benefits
The form’s wage and benefit section has three critical columns that track how the contractor meets the prevailing wage obligation.
Column 6A — Hourly Wage Rate Paid (ST & OT): Enter the actual cash hourly rate paid for straight time and overtime. This should be at least the BHR from the wage determination.
Column 6B — Total Fringe Benefit Credit: Enter the total dollar value of fringe benefits contributed to bona fide plans for that worker. Multiply the hourly fringe credit by the number of hours worked. If the hourly fringe credit is $15.00 and the worker worked 40 hours, enter $600.00 in this column.
Column 6C — Cash Payment in Lieu of Fringe Benefits: Enter the total cash amount paid directly to the worker instead of providing fringe benefits. If the contractor pays all fringes as cash, this column reflects the full fringe amount times hours worked.
Page 2: The Statement of Compliance
Page 2 of the WH-347 includes a certification that the contractor signs under penalty of law. Section 4 has three checkboxes for fringe benefits.
| Checkbox | When to Use It |
|---|---|
| 4(a) — Fringe benefits paid to approved plans | Check this if all fringe benefits go into bona fide plans |
| 4(b) — Fringe benefits paid in cash | Check this if the full fringe amount is paid directly to workers |
| 4(c) — Exceptions | Use this to note special circumstances — e.g., combination of plan contributions and cash |
The updated WH-347 form now requires contractors to list each fringe benefit plan by name, type, and plan number on Page 2. Contractors must also indicate whether each plan is funded or unfunded. If a contractor uses more than six fringe benefit plans, an addendum is required.
Falsifying a certified payroll report is a federal crime. It can result in civil and criminal penalties, contract termination, and debarment from federally funded projects.
State-Level Rules: Beyond Federal Law
Federal law sets the floor, but many states add their own prevailing wage requirements — often called “Little Davis-Bacon” Acts. These state laws may cover projects that do not receive federal funding, and their supplemental benefit rules sometimes differ from the federal framework.
New York: The “Supplements” System
New York State uses the term “supplements” instead of fringe benefits. The NYS Department of Labor publishes prevailing wage schedules for every county and trade classification. Each schedule lists the required hourly wage and the required supplement rate.
New York’s rules mirror the federal structure in many ways. Contractors can satisfy the supplement obligation through bona fide fringe benefits, cash payments, or a combination of both. The NYC Comptroller’s regulations use the annualization method to calculate hourly credit for benefits.
One important New York-specific rule: paid time off (vacation, holidays) is treated as a supplement. A prevailing wage schedule that lists “paid time off” as a supplement requires the contractor to either provide actual paid leave or convert the value to an hourly cash payment. Contractors cannot ignore this line item.
New York’s enforcement is aggressive. Contractors face debarment for five years for two willful violations within six years, or for a single willful violation involving falsified payrolls or wage kickbacks. The NYC Comptroller’s office maintains a public list of debarred employers and has actively pursued enforcement actions from 2021 through 2024.
California: Contractor Registration and Strict Monitoring
California requires contractors on state-funded public works projects to pay prevailing wages under Labor Code §§ 1720–1861. The state’s Department of Industrial Relations (DIR) publishes prevailing wage determinations that include an employer-paid fringe benefit amount for each trade.
California mandates that contractors register with the DIR before bidding on or working on public works projects. The state also requires electronic certified payroll reporting through its eCPR system. These systems allow the DIR to flag potential fringe benefit underpayments automatically.
Other States With Prevailing Wage Laws
About 28 states plus the District of Columbia maintain their own prevailing wage laws. Each has its own rules about supplemental benefits, reporting, and enforcement.
| State | Notable Rule |
|---|---|
| Illinois | Requires prevailing wage on all public works; supplements include health, pension, vacation, and training |
| New Jersey | Prevailing wage covers fringe benefits; contractors must submit certified payroll within 10 days |
| Massachusetts | Supplements must be paid weekly; includes health and welfare, pension, and supplemental unemployment |
| Ohio | Fringe benefits listed separately on wage determinations; applies to projects over $250,000 (new construction) |
Mistakes to Avoid: The Errors That Trigger Investigations
The DOL’s Wage and Hour Division investigates prevailing wage complaints and conducts audits on DBRA projects. Most violations follow predictable patterns that contractors can prevent with proper planning.
Mistake 1: Not Annualizing Fringe Benefit Credits
Dividing the annual benefit cost by only DBRA hours — instead of all hours worked — inflates the hourly credit and creates an underpayment. The DOL’s Fact Sheet #66E specifically identifies incorrect annualization as a common violation.
Mistake 2: Claiming Credit for Legally Required Benefits
Workers’ compensation, Social Security, unemployment insurance, and state-mandated paid sick leave are required by law. The DBRA does not permit any credit for benefits the contractor must already provide under other federal, state, or local laws.
Mistake 3: Running an Unfunded Plan Without DOL Approval
Vacation and sick leave plans funded from general assets need prior written approval from the DOL. Without approval, the contractor receives zero credit — even if the workers actually receive the benefits.
Mistake 4: Claiming Administrative Expenses as Fringe Benefits
The cost of managing benefit plans — paying an accountant to track contributions, hiring a TPA to process claims — is the contractor’s overhead. These costs are not creditable under 29 CFR § 5.33.
Mistake 5: Misclassifying Workers
If a contractor classifies a worker as a laborer instead of an electrician, the worker may receive the wrong wage and the wrong fringe benefit rate. The DOL treats misclassification as a violation with the same penalties as underpayment.
Mistake 6: Paying CBA Rates Below the Wage Determination
Some contractors follow a Collective Bargaining Agreement (CBA) that specifies wage and fringe rates. If the CBA rates are lower than the applicable wage determination, the contractor must pay the higher wage determination rate. The CBA does not override the prevailing wage requirement.
Mistake 7: Failing to Track Subcontractor Compliance
Prime contractors bear joint liability for their subcontractors’ prevailing wage violations. If a subcontractor underpays fringe benefits, the prime contractor is held responsible for back wages and penalties.
Enforcement and Penalties: What Happens When You Get It Wrong
The consequences of fringe benefit violations escalate fast. The DOL has several enforcement tools that can damage a contractor’s finances and reputation.
Back Wages
The most immediate consequence is a back-wage order. The contractor must pay every affected worker the difference between what they received and what they should have received, plus interest at the federal short-term rate plus six percentage points. On a large project, back wages can reach hundreds of thousands of dollars.
Civil Penalties
The IRS imposes a penalty of $5,000 per worker per year for failure to pay prevailing wages (including fringe benefits) on projects claiming clean energy tax credits under the Inflation Reduction Act. For other DBRA projects, the DOL can assess liquidated damages and withhold contract payments.
Debarment
Debarment bars a contractor from bidding on or receiving any federal or federally assisted construction contract. At the federal level, debarment lasts up to three years. In New York State, debarment lasts five years and can be triggered by two willful violations in six years, a single willful violation involving payroll falsification, or a felony conviction related to wage theft.
Contract Termination and Withholding
The contracting agency can terminate the contract and withhold funds from the contractor to cover unpaid wages. These withheld funds are paid directly to the affected workers.
Apprentice Fringe Benefits: A Special Category
Apprentices on DBRA projects follow their own fringe benefit rules. The approved apprenticeship program dictates how much the apprentice receives. If the program does not mention fringe benefits, the apprentice must receive the full fringe benefit amount listed on the wage determination for their journeyworker classification.
Contractors can take credit for the costs of apprenticeship training programs — but only if the program is registered with the DOL’s Office of Apprenticeship or a recognized State Apprenticeship Agency. The credit is limited to costs directly related to training: instruction, books, tools, and materials. Voluntary contributions beyond actual costs are not creditable.
The annualization rule applies to apprenticeship costs too. The contractor divides the total program cost by the total hours worked by all workers in that apprenticeship classification — not just the individual apprentice. Hours worked by laborers or mechanics in other classifications cannot be included.
Eligibility and Waiting Periods for Fringe Benefits
Contractors sometimes worry about new hires who have not yet met a benefit plan’s waiting period. The DBRA allows contractors to take credit for contributions made on behalf of workers who will likely become participants in the plan but have not yet reached eligibility. A health insurance plan with a 30-day waiting period still qualifies for credit.
The key limitation: contractors cannot take credit for workers who are excluded from the plan entirely — such as employees barred because of age or part-time status. If a worker cannot participate in the plan under any circumstances, the contractor must pay that worker’s fringe benefit amount in cash.
Pros and Cons of Different Fringe Benefit Strategies
| Pros of Using Benefit Plans | Cons of Using Benefit Plans |
|---|---|
| Saves on FICA, unemployment taxes, and workers’ comp premiums | Requires managing plan compliance with ERISA, IRS, and state laws |
| Attracts and retains skilled workers with real benefits | Funded plans require irrevocable contributions — money cannot be recovered |
| Reduces taxable income for workers | Unfunded plans need DOL pre-approval, adding paperwork and delay |
| Provides financial protection for workers and families | Annualization calculations can be complex and error-prone |
| Demonstrates good-faith compliance to auditors | Must track contributions for each worker across DBRA and non-DBRA projects |
| Pros of Paying Cash in Lieu | Cons of Paying Cash in Lieu |
|---|---|
| Simple to administer — just add to paycheck | Payroll taxes apply to full amount, increasing labor costs by 25%+ |
| No benefit plan management or ERISA compliance | Workers receive no actual health, retirement, or other coverage |
| No annualization calculations needed | Higher workers’ compensation premiums due to larger payroll base |
| Workers get immediate access to funds | May reduce competitiveness in recruiting skilled tradespeople |
| Easy to document on WH-347 form | Does not provide long-term financial protection for workers |
Do’s and Don’ts of Prevailing Wage Supplemental Benefits
Do’s
- Do verify the wage determination before the project starts — check both the BHR and fringe rate for every trade classification on the project.
- Do annualize fringe benefit credits using all hours worked by each employee during the year, including both DBRA and private project hours.
- Do get written DOL approval for any unfunded fringe benefit plan before claiming credit on a DBRA project.
- Do keep detailed records of every fringe benefit contribution, including plan documents, contribution receipts, and worker eligibility status.
- Do review subcontractor payrolls weekly to catch fringe benefit errors before they become back-wage liabilities.
Don’ts
- Don’t claim credit for legally mandated benefits like workers’ comp, Social Security, or state-required paid sick leave — the DBRA specifically bars these credits.
- Don’t use a CBA rate if the wage determination requires a higher fringe benefit rate — the wage determination always controls.
- Don’t count administrative expenses like TPA fees, payroll processing costs, or internal HR time as fringe benefit contributions.
- Don’t assume one fringe benefit covers the full obligation — always calculate the hourly credit after annualization and pay any shortfall in cash.
- Don’t falsify certified payroll reports — this is a federal crime that leads to criminal prosecution, fines, and permanent reputational damage.
FAQs
Can fringe benefits be paid entirely in cash?
Yes. The contractor can pay the full prevailing wage (base rate plus fringe amount) as cash wages to satisfy the DBRA obligation.
Are fringe benefits subject to overtime pay?
No. Cash paid in lieu of fringe benefits is excluded from overtime calculations under the FLSA and CWHSSA.
Can a contractor take credit for workers’ compensation insurance?
No. Workers’ compensation is required by state law and cannot be credited toward the prevailing wage fringe obligation.
Do apprentices receive fringe benefits?
Yes. Apprentices receive fringes per their approved program. If the program is silent, they get the full journeyworker fringe rate.
What happens if a contractor underpays fringe benefits?
The contractor owes back wages plus interest and faces potential penalties of $5,000 per affected worker per year of noncompliance.
Does the annualization rule apply to all fringe benefits?
No. Defined contribution pension plans with immediate participation and vesting within 500 hours are excepted from annualization.
Can a contractor recapture contributions made to a funded plan?
No. Contributions to funded plans must be irrevocable. The contractor cannot take back or redirect funds once deposited.
Do state prevailing wage laws also require supplemental benefits?
Yes. About 28 states have their own prevailing wage laws with supplemental benefit requirements that may differ from federal rules.
Is DOL approval needed for funded fringe benefit plans?
No. Funded plans that meet ERISA and IRS standards do not need DOL pre-approval. Only unfunded plans require prior written approval.
Can a contractor claim credit for training program costs?
Yes. But only for programs registered with the DOL’s Office of Apprenticeship, and only for costs directly related to training.
Are transportation or travel expenses considered fringe benefits?
No. Transportation, board, lodging, and travel expenses are not creditable as fringe benefits under the DBRA.
What is the WH-347 form used for?
It is the certified payroll report that contractors submit weekly to document wages and fringe benefits paid on DBRA-covered projects.
Can fringe benefits be paid monthly instead of weekly?
Yes. Contributions to funded plans can be made periodically, but must occur at least quarterly to remain creditable.
Does paying cash in lieu of fringes increase payroll taxes?
Yes. Cash fringe payments are taxable wages, subject to FICA, unemployment taxes, and workers’ compensation premiums.
Can a contractor use excess cash wages to offset fringes?
Yes. Under the DBRA, cash wages paid above the basic hourly rate can offset the fringe benefit portion of the prevailing wage.