ACA Compliance with the Fringe Benefit Requirements of the Service Contract Act, Davis Bacon Act, and Davis Bacon Related Acts
Workers on contracts that must comply with the above regulations receive prevailing wages and fringe benefits while working. Health coverage is one of the types of fringe benefits that must be provided. Each of these laws (ACA, SCA, and DBRAs) are separate and each must be complied with.
Question: Can contributions toward health coverage by employers subject to the employer shared responsibility provisions be credited toward the payment of fringe benefits under the SCA and DBRAs?
Answer: You are not permitted to receive credit for any benefit that is required to be given by law. Health benefits provided by employers subject to the ACA mandate are not benefits required by law. Employers can continue to take SCA or DBRA credit for contributions to bona fide health plans.
Question: Can employers’ payments of employer shared responsibility payments to the IRS be credited toward DBRA and SCA obligations?
Answer: No, that payment does not qualify because it does not benefit the employee. The payment being credited for providing benefit must be from a benefit that provide a direct, specific benefit to the employee. A payment of the employer shared responsibility payment to the IRS does not do this.
Question: If an employee declines an employer’s offer of employer health coverage, must the employer still furnish fringe benefits under SCA or DBRAs?
Answer: If an employee declines an offer of employer health coverage, the employer must still satisfy its SCA or DBRA obligations through some other means, either in cash or providing some other bona fide fringe benefit.
Question: If an employer offers a health plan that constitutes a bona fide fringe benefit under the SCA and DBRAs, will that satisfy ACA requirements and allow the employer to avoid owing an employer shared responsibility payment?
Answer: It is anticipated that eligible employer-sponsored plans, as defined under the ACA, will be bona fide under the SCA and DBRAs. Employers that wish to avoid being liable for an employer shared responsibility payment must separately determine whether the offer of their bona fide health plans is sufficient to avoid the penalties.