The U.S. Department of Labor’s Wage & Hour Division (DOL) recently issued an all agency memorandum “to provide guidance to governmental and other entities on the interaction of the ACA…and the fringe benefit requirements of the McNamara-O’Hara Service Contract Act [SCA], Davis-Bacon Act, and Davis-Bacon Related Acts [DBA].”
Under the ACA, “applicable large employers” (ALE) with 50 or more full-time employees (or equivalents) must meet the law’s “shared responsibility” mandate by either offering health coverage to full-time employees (and dependents) that is “affordable” and that provides “minimum value,” or pay a “shared responsibility” payment to the Internal Revenue Service (IRS).
Under the SCA and DBA, federal contractors are required to pay prevailing wages and fringe benefits to employees working on covered contracts. However, both laws allow contractors to pay the fringe benefits in the form of (a) actual benefits, (b) cash, or (c) a combination of the two.
The DOL’s recent memorandum makes four things abundantly clear: (1) contractors covered by the SCA/DBA and that are also ALE’s under the ACA must comply with both laws, (2) contractors covered by both the SCA/DBA and the ACA will no longer be able to simply pay all cash for the required benefit payments; (3) simply because a health plan may be considered a “bona fide” fringe benefit under the SCA/DBA does not mean it will automatically be deemed to be “affordable” or provide “minimum value” under the ACA; and (4) ALE’s with SCA or DBA contracts may use the health and welfare dollars it applies toward health coverage when determining if a medical plan is deemed affordable under the ACA.
For a detailed discussion of the issues surround the intersection of these laws, you may review the full text of the DOL’s memorandum.