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Frequently Asked Questions

1. What is the best way to comply with Health and Welfare requirements in government contracts?

By implementing a specially designed "bona fide" fringe benefit plan which meets, but does not exceed, the Health and Welfare allocation in your contracts, you can provide high quality government contract compliant benefits at no cost to your company or employees. Insured Benefit Plans will develop plans that utilize the exact fringe amounts with benefits that can include medical, dental, vision, disability, critical illness, life insurance, and retirement. Moreover, the savings to your company can yield a significant advantage during contract renewal negotiations and may result in your retaining and/or obtaining contracts.

2. How can providing benefits be free to my company and employees yet save my company money?

Health and Welfare allocations in government contracts are earmarked for actual benefits and are designated to provide "bona fide" benefits at no expense to your company or employees. When Health and Welfare dollars are paid to bona fide" benefit plans, you provide valuable benefits entirely at the government's expense. Since such payments are made on a before-tax basis and are not part of your company's payroll, you legally avoid wasting thousands of dollars in unnecessary payroll related taxes and expenses.

3. Can my company pay the Health and Welfare in the check as cash in lieu of actual benefits?

Providing cash payments of fringe benefit dollars is the most expensive means of complying with the Health and Welfare requirements since your company must also pay all applicable payroll taxes and payroll related expenses (FICA, FUTA, SUI, Workers' Compensation, etc.). Your company actually loses money by paying the Health and Welfare in the check. Moreover, as contracts become increasingly more price sensitive and competitive, a company which pays cash in lieu of benefits risks reducing profitability and increasing costs, which can result in lost contracts.

4. Why does the government penalize a contractor for paying cash in lieu of benefits?

The spirit and intention behind providing Health and Welfare allocations in government contracts is three-fold: 1) to provide "bona fide" pre-tax benefits to government contract employees free of cost to the contractor and the employee; 2) to allow the contractor to install a Health and Welfare program with mandatory participation; and 3) to level the playing field between union and non-union contractors. As such, government contracting guidelines clearly favor providing "bona fide" Health and Welfare fringe benefits instead of paying cash.

Learn about the Service Contract Act & Davis-Bacon Act

How can we benefit you?

  • Save on payroll assessment taxes
  • Submit more competitive bids
  • Offer medical, dental, vision, disability and life insurance
  • Submit more competitive bids
  • Stay in compliance DOL, IRS and State regulations
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