The Contractor's Choice

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STRUCTURING YOUR BENEFITS TO BID MORE
COMPETITIVELY ON GOVERNMENT JOBS
Presented by
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INTRODUCTION

• Hostetler Insurance Background
• Fringe Benefit Group / The Contractors Plan
  Background

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SPEAKER Barbara Hostetler, LUTCF, CPIA

• 11-Years Employee Benefit Consulting Experience
• Construction Industry Relationship
• 5-Year Partner with The Contractors Plan
• Central PA Small Group Focus

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TODAYS PURPOSE

• Identify Common Mistakes in Fringe Administration
• Update Regarding State Overtime Workers Comp
  Requirements
• Why Benefits Instead of Cash
• Hour Banking Health Plans
• Review of Builders Benefits Health Plan

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WAGE DETERMINATION
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WAGE OBLIGATION

• Base Wage Paid in Cash
• Fringe May be Paid
• Into a vacation fund
• Into an approved apprenticeship program
• Furnish bona fide fringe benefits
• As cash, treated as wages

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THE PROBLEM
Most contractors pay the majority of the Fringe
in CASH
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THE PROBLEM
Paying the fringe portion in cash is the most
EXPENSIVE way to go
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WHY?

• All CASH wages are subject to a payroll tax
  burden
• - F.I.C.A. 7.65
• - F.U.T.A 3.00
• - S.U.T.A. 2.00
• - Public Liability 2-15
• - Workers Compensation 10-50
• The average payroll burden is between 20-50
• dependent on State regulations

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OT WC IN PA

• Recent History Cash Fringe NOT INCLUDED in
  Overtime or Workers Comp Calculations in PA
• Cash Fringe Historically INCLUDED in Overtime and
  Workers Comp Calculations in most States
  Bordering PA
• Update Cash Fringe NOW INCLUDED in Overtime and
  soon will be included in Workers Comp
  Calculations in PA
• No Change in Law
• Change in Interpretation by DOL
• Change in the Nature of the Money
• NOT INCLUDED in Davis-Bacon Work

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CALCULATIONon a Small Scale
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CALCULATIONon a Larger Scale
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The most cost-effective way to fulfill the fringe
obligation is to provide Bona Fide Fringe
Benefits
CASH ALTERNATIVE
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BONA FIDE

• Specified in Writing
• Communicated in Writing
• Irrevocable Contributions
• Group Benefit Plan

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BONA FIDE FRINGE

• Contributions made to a third party or trust
• Convey a benefit to the person performing the
  work
• Accounted for on an hourly basis (weekly payroll
  reporting form WH347)

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PREVAILING WAGE CONTRACTOR SEMINARSAMPLE WAGE
RATE Base of 30.00 Fringe of 10.00 Total
Wage Rate of 40.00
YOU EITHER MAKE OR SAVE 1.11 PER MAN-HOUR WITH
OPTION 2
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PREVAILING WAGE CONTRACTOR SEMINARSAMPLE WAGE
RATE Base of 30.00 Fringe of 10.00 Total
Wage Rate of 40.00
YOU EITHER MAKE OR SAVE 2.11 PER MAN-HOUR WITH
OPTION 2
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EMPLOYER BENEFITS

• Simple Design
• Low Cost
• Multiple Contribution Options
• Flexibility Turn On/Off
• Fiduciary Protection
• Owners and Executives May Participate at Higher
  Maximums

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BOOST / OFFSET
Prevailing Wage contributions can be used to
boost the actual deferral percentage of the
non-highly compensated employees (NHCE) which in
turn increases the amounts the (HCE) can
defer. OR Prevailing Wage contributions can be
used to offset profit sharing contributions by
the amount of the Prevailing Wage contributions
which have already been allocated to the covered
employees accounts.
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How Your Prevailing Wage Contributions Benefit
Owners and Top Staff Example 1 Profit Sharing
Offset
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How Your Prevailing Wage Contributions Benefit
Owners and Top Staff Example 2 401(k) with
Prevailing Wage Boost
Prevailing Wage - If paid in Cash
Prevailing
Wage Used as Boost
1If NHCE ADP is lt2, the HCE Deferral is 2x the
NHCE ADP 2If NHCE ADP gt8,
the HCE Deferral is 1.25 x the NHCE ADP

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EMPLOYEE BENEFITS

• They pay income tax only on cash wages
• They pay FICA only on cash wages
• Employees have individual accounts
• Option to direct their own investments within a
  portfolio of stock, bond and fixed income accounts

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EMPLOYEE BENEFITS

• 24/7 access to account information via web or
  800
• Quarterly account statements by mail
• Lump sum cash out option 60 days after
  termination of employment
• Income at retirement

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INVESTMENTS

• 2-Tier Menu Design
• Quality Fund Selection with Name Brands
• Fiduciary protection for Contractors

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2-TIER MENU

• TIER 1 - Pro-Mix A range of Objective Based
  Life Cycle Funds Options for those who prefer to
  delegate to an Investment Professional
• TIER 2 - Self-Mix A selected range of Asset
  Class Options for the do it yourselfers

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FRINGE HEALTH PLANS

• Full Major Medical Plans
• Limited Benefit Indemnity Plan
• Credits vs. Hour Banking

Check for Availability by State
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HOUR BANK

• The required hours of work credit will qualify an
  eligible employee (and his/her eligible
  dependents) for (1) calendar month of benefits
• Employees may accumulate hours of work credit for
  excess hours worked
• Employers remit premium only for hours worked
• Avoids possible ineligibility under traditional
  programs

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HOUR BANK

• Protects employees from layoffs, inclement
  weather, etc.
• Allows employees to bank up to 12 months of
  health care
• COBRA Administration included
• Hour bank may be cashed out or used for COBRA
  premiums at employee termination

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STANDARD SECURITY

• Allows for Hour Banking
• Provides optional Life/ADD and Disability
  benefits
• Requires medical underwriting for groups of 2
  50 Eligible Employees
• Provides guaranteed coverage for groups of 51
  Eligible Employees
• Provides access to the best local networks PHC,
  SCP, PrimeSource, BHP
• Demographically rated

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UNITED HEALTHCARE

• Allows for Hour Banking
• No medical underwriting required
• Available to groups of 50 Eligible Employees
• Provides access to the United Healthcare national
  network
• Rates established for 1/1 12/31, 2008

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BUILDERS BENEFITS

• No Hour Banking
• Medical underwriting required for groups of 1
  20 Eligible Employees
• No employee-specific medical underwriting
  required for groups of 21 Eligible Employees
• Provides access to the HealthAmerica /
  HealthAssurance network
• Demographically rated

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SUMMARY

• Providing Bona Fide Company Benefits will
• Reduce your Payroll Tax Burden
• Make you more Competitive
• Increase your Profits
• Equalize Private vs. Public Project Wages
• Promote Employee Retention

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CALCULATIONon a Small Scale
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CALCULATIONon a Small Scale
Warwick Middle School Additions
Renovations Award Date 5/1/08 Electrician Base
29.02 Fringe 13.12 Medical Credit 1.90
(Single)
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PREVAILING WAGE CONTRACTOR SEMINARWarwick /
Electrician Base of 29.02 Fringe of 13.12
Total Wage Rate of 42.14 Medical Insurance
Credit of 1.90 (Single)
YOU EITHER MAKE OR SAVE 1.25 PER MAN-HOUR WITH
OPTION 2
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CALCULATIONon a Small Scale
Warwick Middle School Additions
Renovations Award Date 5/1/08 Electrician Base
29.02 Fringe 13.12 Medical Credit 6.25
(Family)
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PREVAILING WAGE CONTRACTOR SEMINARWarwick /
Electrician Base of 29.02 Fringe of 13.12
Total Wage Rate of 42.14 Medical Insurance
Credit of 6.25 (Family)
YOU EITHER MAKE OR SAVE .76 PER MAN-HOUR WITH
OPTION 2
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SUMMARY
www.fibi.com/savings_calc.asp
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QUESTIONS?
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CONCLUSION

• Thank you for coming today! We hope that your
  company will benefit from our discussion.
• Before you leave, please
• Complete the Evaluation Form
• Leave your Business Card / Contact Information

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THANK YOU!
Information Presented by Barbara Hostetler,
LUTCF, CPIA Hostetler Insurance Associates, Inc.
in partnership with The Contractors Plan (717)
293-7100, ext. 105 brh_at_hostetlerinsurance.com