Davis-Bacon fringe benefits: how plan costs become an hourly credit

Every rate line on a wage determination has two parts: a base rate and a fringe. A common assumption is “we pay for health insurance, so the fringe is covered.” Maybe it is. But the credit you can claim is calculated a specific way, and the WH-347 asks you to show it.

This guide covers the ways to meet the fringe, how plan costs become an hourly number, and the mistakes that make a weekly report look short.

Three ways to meet the fringe

Under 29 CFR 5.31, you can meet your obligation by:

Paying the base rate in cash and making bona fide fringe benefit contributions that total at least the fringe on the determination.
Paying the base rate in cash plus an extra cash payment in lieu of the fringe.
A combination of the two.

The base rate has to be paid in cash. Plan credit cannot make up a shortfall in base pay. Wages are due at least weekly, but regular plan contributions made less often than weekly, as long as they are made at least quarterly, are treated as made during the weeks they cover.

What counts as a bona fide benefit

The Davis-Bacon rules list medical or hospital care, pensions, compensation for work-related injury or illness, disability, sickness and accident insurance, unemployment benefits, life insurance, vacation and holiday pay, apprenticeship costs, and other bona fide benefits. Some points matter:

Contributions must be made irrevocably to a trustee or third party that is not affiliated with you, and you cannot recapture or divert the money.
Conventional plans funded through a trust or insurance generally do not need Department of Labor approval. A self-funded plan paid from your general assets does, and DOL may require you to set assets aside.
Costs the law already requires you to provide do not count. Workers’ compensation insurance is the example the rules give. Travel, subsistence and industry promotion funds are not normally treated as fringe benefits either.
Apprenticeship credit is limited to registered programs and to costs reasonably related to the training provided. It cannot offset costs for another classification.

Turning plan costs into an hourly credit

Plans bill by the month, quarter or year, but the wage determination is hourly. The rules require you to annualize: divide the total cost of the contribution by the total hours the worker put in on all work, covered or not, during the period the cost covers. If the contribution differs by worker, you work it out for each worker.

The key phrase is all work. Hours on other jobs go in the divisor, not just hours on the federal one.

There are exceptions. Contributions to a defined contribution pension plan are excepted if the plan provides immediate participation and essentially immediate vesting, meaning the benefit vests within the first 500 hours worked. Other plans can ask the Wage and Hour Division for an exception. If you think one applies, check with the plan administrator or your agency before relying on it.

A worked example

These numbers are made up. For example, suppose the determination lists a laborer at $30.00 base and $12.00 fringe, $42.00 in all. One worker has these costs:

A health premium of $640 a month, paid to an insurer.
A retirement plan contribution of $2.00 for every hour worked on any job.
In the month, 160 hours on all jobs, including 40 hours on the federal job in one week.

The math:

Health credit: $640 ÷ 160 hours = $4.00 per hour.
Retirement credit: $2.00 per hour.
Fringe left to cover: $12.00 - $4.00 - $2.00 = $6.00 per hour, paid as cash in lieu.

For the federal week of 40 hours, that is $1,200 base pay, $240 cash in lieu, $160 of health credit and $80 of retirement credit. The total is $1,680, which is 40 hours at $42.00.

A common error is dividing the $640 by the 40 federal hours. That gives $16.00 per hour, more than the whole $12.00 fringe, and it overstates the credit.

Common mistakes

Dividing by covered-job hours only. See the example above.
Counting benefits the law requires, such as workers’ compensation, or items like travel pay that are not fringe benefits.
Claiming a self-funded plan without approval from the Department of Labor.
Using plan credit to cover base pay. The base rate must be paid in cash.
Using one fringe number for every classification. Each classification on the determination has its own.
Contributions made less often than quarterly. They do not get the rule that spreads them across the weeks they cover.
Overtime figured on too low a base. The rate overtime is calculated on cannot be lower than the basic hourly rate on the determination.
Apprentice fringes. Apprentices get fringes under their program. If the program is silent, they generally get the full fringe on the determination.

What the WH-347 shows

On page 1, column 6A is the hourly rate paid for straight time and overtime. Column 6B is the total fringe benefit credit you are taking for plans. Column 6C is the cash paid in lieu of fringes, which is hours worked times the hourly cash in lieu. In the example above, 6C is $240.

On page 2, if you list anything in 6B, you show each worker’s hourly credit by plan: the plan name, type and number, and whether it is funded or unfunded. The Statement of Compliance then certifies that the wage and fringe rates paid, including credit for plan costs, are not less than the determination. For the rest of the form, see how to fill out a WH-347 without getting it kicked back.

A fringe checklist

Write down the base rate and fringe for each classification you use.
For each plan, record the amount, the period it covers and the worker it is for.
Add up each worker’s hours on all jobs for that period, not only this one.
Divide the cost by those hours to get the hourly credit.
Cover the rest of the fringe with more plan credit or cash in lieu.
Confirm the base cash rate is at least the determination’s base.
Record plan name, type, number and funded or unfunded status for page 2.
Redo the math when the period closes or the hours change.

Where Payrung fits

Payrung is being built to hold each worker’s plan contributions, divide them across hours worked on all jobs, put the hourly credit on the WH-347 plan table, and flag any week where base, credit and cash in lieu fall short of the determination. If you would like early access, join the waitlist.

This guide is general information, not legal or payroll advice. Confirm requirements with your contracting agency or a qualified advisor.