Downstream Compliance and Contractor Responsibility

Every year, the federal government spends more than $500 billion a year on contracts. More than 50 percent of that total works its way down to subcontractors.

Wow.

The business of government contracting is built upon the hard work of government contractors and the subcontractors that make these massive projects possible. It’s a partnership that is not only common but vital.

So what laws apply in these working relationships? The subcontractor is subject to the same laws and regulations as the prime contractor when that subcontractor enters into an arrangement with a federal contractor for any service that is necessary to the performance of any one or more government contracts.

The same rule applies to an arrangement that assumes, undertakes, or promises performance of any portion of the federal contractor’s obligation under one or more government contracts.

Additionally, the prime contractor is also responsible for the subcontractor’s compliance with the regulatory requirements.

Many subcontractors do not have access to the professionals that can design compliant and comprehensive healthcare solutions. As stated above, ultimately, the prime contractor is responsible for the overall compliance of all parties working under the prime contract. So, how are the prime contractor and its subcontractors to ensure their compliance?

By understanding the rules and working with professionals who know them.

Contractors have options on how they spend the fringe dollars afforded to them. Employers that provide health insurance typically experience more employee engagement, reduced absenteeism, and significantly lower healthcare costs overall.

For 35+ years, Boon has been providing our clients with efficient, knowledgeable, and purposeful solutions to address their compliance issues. We can keep you compliant from the top down, all while providing your employees accessible healthcare through flexible and meaningful healthcare plans.

The Boon Blog is your source for the latest in industry tips, information, and news. You can also keep up with all things Boon on our FacebookTwitter, and LinkedIn.

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Boon Buzz: HSA/HDHP Limits Will Increase for 2019

The IRS limits for HSA contributions are set to increase for 2019. This also includes the limits for HDHPs.

The Internal Revenue Service (IRS) announced the inflation-adjusted limits on health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2019 on May 10, 2018. The Revenue Procedure 2018-30 details the following limits:

  • The maximum HSA contribution limit
  • The minimum deductible amount for HDHPs
  • The maximum “out-of-pocket” limit for HDHPs

Some dates to remember. On January 1, 2019 the increase in HSA contributions limits will go into effect. As for the HDHP limits, those increases will be effective for plan years beginning on or after January 1, 2019.

Now, let’s get to numbers. The HDHP Minimum Deductible for both self and family will remain unchanged; $1,350 for self-only and $2,700 for family. Another unchanged amount is the HSA catch-up contributions for those age 55 or older; from 2018 to 2019 the amount remains at $1,000.

For the HSA contribution limit, Self-only contributions jumped from $3,450 to $3,500 from 2018 to 2019. The Family limit made a $100 jump between 2018 and 2019; from $6,900 to $7,000.

The maximum out-of-pocket expense limit includes such things as deductibles, copayments, and other amounts that do not fall under premiums. This was the area of greatest increase, across the board. From 2018 to 2019 Self-only out-of-pocket increase from $6,650 to $6,750. The family limits increased by a factor of $200, increasing to $13,500 from the 2018 limit of $13,300.

What does this mean for employers? Due to these changes, employers that sponsor HSA and HDHP plans may look to adjust their plan design for the beginning of 2019. It’s recommended that employers communicate the HSA contribution limits to employees as part of the enrollment process and that all enrollment materials be updated to reflect the increased limits.

The Boon Blog is your source for the latest in industry news. You can keep up with the world of healthcare, industry updates, and all things Boon on our Facebook, Twitter, and LinkedIn.

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Lawsuit Pushes Back Against DOL Rule

Eleven states, accompanied by the District of Columbia, have launched a lawsuit against the federal government. This suit is led by New York and the following states have signed on, as well: California, Delaware, Kentucky, Maryland, Massachusetts, New Jersey, Oregon, Pennsylvania, Virginia, and Washington. This group hopes the suit will push the Department of Labor to roll back a recent regulation to expand access to associated health plans (AHPs). These AHPs are generally cheaper but offer fewer benefits.

The regulation in question expands who can gain access to an association health plan. In practice, this would enable small businesses to join together when getting insurance. In a previous post here on the Boon Blog, we discussed the regulation and its potential impact in greater detail. You can check it out here.

In the lawsuit, states charge that this regulation is intended to move a large number of individuals and small employers into the large group market to avoid the core protections of the Affordable Care Act. The individual market allows people to obtain health insurance, if they are unable to access it through the government or their job. The small group market is used by small businesses to insure employees.

The Affordable Care Act’s essential health benefit requirements do not apply in the large group market. Further, the states participating in the suit allege that the final rule is unlawful because it operates in direct conflict with the statutory structure adopted by Congress in the ACA, to apply basic protections to individuals and small groups. The states claim that this will do harm as it will require them to devote additional resources to managing a high volume of fraudulent or inadequate plans offered by associations.

This is a rapidly developing issue, so keep up with the Boon Blog for the latest developments. You can also catch up on all things Boon on our Facebook, Twitter, and LinkedIn.

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New SCA Fringe Rates for 2018/2019 Issued

The Wage and Hour Division has released the new fringe rates for 2018/2019.

The Wage and Hour Division’s All Agency Memorandum 227 sets the Service Contract Act (SCA) Health and Welfare Fringe Benefit rate for $4.48 per hour, an increase from the previous year’s fringe rate of $4.41 per hour. This new fringe rate became effective on July 11, 2018.

In addition, the All Agency Memorandum sets a Welfare Fringe Benefit rate of $4.18 per hour for contracts under the SCA that are also bound by EO 13706. This also represents a small increase with the health and welfare rate increasing from $4.13 per hour.

Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors, requires that employers that contract with the federal government provide their employees with up to 56 hours of paid sick leave annually; this comes out to seven days paid sick leave. This rule applies to “new” government contracts entered into on or after the Executive Order’s effective date, January 1, 2017. This paid leave can also be applied to family care and any employee absences that occur as a result of domestic violence, sexual assault, and stalking.

These increased fringe rates already present many interesting considerations with respect to both providing meaningful benefits and with compliance. Most notably, under this new fringe rate, there is potential for a given contractor to have five different contracts with five different fringe rates.

Talk about a compliance minefield!

Our comprehensive compliance services navigate this changing landscape and guard against potential compliance pitfalls so that you don’t have to. Our ability to create flexible plans that are customized to the fringe keeps you compliant and covered in the most cost-efficient way.

The Boon Blog is your resource for the latest in industry updates. You can also catch up with Boon on Facebook, Twitter, and LinkedIn!

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DOL Finalizes Rule to Expand Association Health Plans

On June 19, the Department of Labor (DOL) released a final rule that makes it easier for small employers to join together to purchase health insurance.

By forming these benefit arrangements, called Association Health Plans or AHPs, small employers can work around certain Affordable Care Act reforms that apply to the small group market. The goal of this rule is to offer small employers more affordable health insurance options. Also according to the DOL, the changes expand access to affordable, high-quality health insurance coverage.

Sound too good to be true? It just might be.

Critics of the rule worry about potential risks to consumers and market stability. In exchange for these lower premiums, AHPs may cover fewer benefits. Most of these AHPs will not be subject to the ACA’s essential health benefits reform. That reform requires small group plans to cover a core set of items and services, such as mental health and maternity and newborn care.

We recommend that employers carefully review the AHP’s benefit design to make sure it’s the right fit for their workforce. Employers should also be mindful of the fact that AHPs are regulated at the federal and state level and the availability of these plans will rely on how a particular state approaches these kind of regulations.

So, where did this final rule come from?

In October 2017, President Trump signed an executive order directing the DOL to consider regulations that would permit more employers to form AHPs in order to expand access to affordable health coverage.

As it stands, the criteria that is required for a group of employers to sponsor a single ERISA plan is very limiting. Under these current rules, the size of each participating employer determines whether the coverage is subject to the small group or large group market rules.

What are AHPs exactly?

AHPs are a type of multiple employer welfare arrangement that has, historically, been taken advantage of and has a history of defrauding customers. The Affordable Care Act has provisions in place that target these abuses, like improved reporting and stronger enforcement.

As mentioned previously, there are concerns that expanding AHPs will result in potential customer fraud. In their final rule, the DOL notes that it is relying on the close cooperation of state regulators to guard against fraud and abuse.

How will the final rule work?

This reform provides small employers, with a greater ability to join together and gain many of the regulatory advantages enjoyed by large employers.

The rule allows employers to join together to form an AHP that is a single ERISA plan if either of these requirements is satisfied:

  • The employers are in the same trade, industry, and profession
  • The employers have a principal place of business within a region that does not exceed boundaries of the same state or metro area.

The rule also allows working owners that don’t have other employees to join AHPs.

When it comes to distinguishing single plan AHPs from commercial insurance arrangements, the final rule requires that the following conditions be satisfied:

  • The primary purpose of the group may be to offer health coverage to its employees; but, the group also must have at least one substantial business purpose unrelated to offering health coverage or other employee benefits.
  • Each employer member of the group or association participating in the group health plan must be the employer of at least one employee who is a plan participant
  • The group has a formal organizational structure with a governing body and has bylaws or other similar indications of formality
  • The group’s member employers control its functions
  • Only employees of the current employer members may participate in the group health plan sponsored by the association
  • The group is not a health insurance issuer or owned or controlled by an issuer

The final rule also requires AHPs to comply with certain consumer protections and anti-discrimination protections that apply to the large group market. AHPs under this rule will not be able to charge employers different rates based on the health status of their employees.

This rule does not affect existing AHPs that are allowed under the DOL’s current rules. These plans can either continue on as they are or elect to follow the new requirements.

What are the dates to remember?

Sept. 1, 2018: Fully insured plans may begin operating under the new rule.

Jan. 1, 2019: Existing, self-insured AHPs may begin operating under the new rule.

Apr. 1, 2019: New, self-insured AHPs may begin.

Compliance continues to be key.

One of the major stumbling blocks for government contractors is compliance. Keeping up with rules, regulations, and changes is difficult. Especially, once you begin factoring in multiple organizations and the needs of all those employees.

The Boon solution is our flexible, customized employee benefit plans that place the emphasis on compliance. We’ve got 35+ years of expertise and the resources to address any compliance issues that may arise!

Trust the Boon Blog as your resource for industry updates. You can also catch us on Facebook, Twitter, and LinkedIn.

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The Difference Between a 401(k) and a 401(a) (And Why It Matters)

I’m sure you’ve heard of a 401(k) as the type of retirement plan most commonly utilized by businesses and employers but what do you know about a 401(a)? Read on to learn more about the difference between a 401(k) and a 401(a) and what plan may be most meaningful to you and your business:

Let’s start with what the 401(k) and the 401(a) have in common. Both are workplace retirement plans under Section 401 of the Internal Revenue Code. To be honest, that’s about it. They may stem from the same 401 section of the tax code, but there are some pretty significant differences between the two.

The primary difference between the 401(k) and the 401(a) is the type of employer that is offering them. 401(k) plans are typically offered by private-sector employers. The 401(k) gives employees the option to invest pre-tax dollars out of their paycheck into their retirement. Employees have the option of determining the percentage and some companies further incentivize employees with a matching program. 401(a) plans are normally associated with the following: government agencies, non-profits, and educational institutions. 401(k) plans are open equally to all employees of a particular company. 401(a) plans offer greater opportunity for customization and are only offered to designated employees as an incentive for that employee to stay with an organization. The employer sets the employee contribution amount and the employer is mandated to contribute to the plan.

There are many other noteworthy distinctions between a 401(a) and a 401(k). 401(a) plan contribution amounts are set by the employer, while the 401(k) allows the employee to decide what they prefer to contribute. 401(k) plans present employees with a range of investment products while 401(a) plans turn over control of investment options to the employer. 401(a) plans make participation mandatory whereas 401(k) plans do not.

For a government contractor, there are considerations that go beyond just choosing a retirement plan for your employees. A government contractor is a competitor. Your private business must go toe-to-toe with other contractors. To be in fighting shape, you want your best team with you. You want to look after your valued team members and you want to be driving your costs down so that each bid you place is cost effective and competitive. A 401(a) may be the solution for you.

Why a 401(a)? As we have covered already, 401(a) plans  are the qualified retirement plan of choice for government agencies. It’s the standard for the industry you’re in, as a business that works so closely with these government entities. 401(a) plans are not covered by Title I of ERISA, so that means your state makes the rules. 401(a) plans offer the employer a great deal of control. These sorts of plans lend themselves to being more customizable and one of the greatest boons they offer is that the employer gets to designate which of their employees reap the benefits. Additionally, 401(a) contribution amounts are set by the employer, which provides additional control to the employer over the plan.  Control over the amounts of contributions and mandatory participation make 401(a) plans ideal for government contractors who have a fixed and required spend to provide their employees with benefits.

The Boon Group specializes in flexible, highly customizable retirement plans for small businesses. Our goal is to create a plan that does the most work for you and the employees you want to take care of. We are here to provide the plan design analysis that helps you identify the best way to allocate the money to the people you want and/or maximize your account. Boon can offer government contractors a more targeted plan design that is developed based on the demographics of your company. Our experts understand how to efficiently use the rules of the IRS to maximize your tax deduction and help you create a comfortable retirement for the employees you designate.

Want to learn more? Contact elittle@booninvestmentgroup.com and check us out at www.theboongroup.com.

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What is a Bona Fide Fringe Benefit?

So, you’re entitled to bona fide fringe benefits. What is that? Or maybe you’re an employer double-checking that you are satisfying all SCA benefit compliance requirements? You need to know that your employees are being taken care of!

You know The Boon Group® to be the benefits company focused on meaningful health and welfare benefits for government contractors, so trust us as your resource on bona fide fringe benefits.

Read on to learn more!

A quick lesson in linguistics: bona fide means something that is made in good faith without fraud or deficit; by extension, to be of earnest intent. Really, a great way to think about this is that a bona fide fringe benefit is the way an employer takes care of its employees, beyond the given expectations of wages for their hard work. In government contracting, bona fide benefits are the plans that you use to meet your fringe benefit obligations.

The devil is in the details, in particular the legalese. Per the Code of Federal Regulations, for a fringe benefit to be considered “bona fide” under the Occupational Safety and Health Act of 1970 the benefit must meet a particular criteria.

The first item on the checklist boils down to basic contract law. The provisions of your benefit plan must be clearly specified in writing. An employer, under the Service Contract Act or Davis Bacon Act(s), can sponsor and require participation in a plan using fringe dollars. Any contributions made by an employee to that plan must be totally voluntary and cannot be involuntarily deducted from the employee’s wages or used by an employer in satisfying any part of the fringe benefit obligation.

The fringe and prevailing wage regulations specify that any benefits provided by a government contractor must be benefits separate from or made in addition to the employee’s wages. It’s also permitted that fringe benefits can be furnished by cash or the equivalent benefits; payments on these benefits must be segregated as benefits, not as wages. Providing a benefit plan can reduce costs for contractors on bids, increase competitiveness against peers, all while simultaneously providing employees with best in class benefits. These benefits may be what give you the competitive edge in recruiting and retention of key employees. How do these bona fide fringe benefits make you more competitive? We’re glad you asked!

By entrusting your administrative needs to a third-party, rather than maintaining your own in-house team, you lower your personal costs which brings down the total of your bid. In the world of government contracts; winners are made on these small percentages. Use Boon’s superior administrative services, stand a head above your competition.

So what kind of benefits make up bona fide fringe benefits? Here are a few of our favorite examples:

  • Health Insurance
  • Disability Insurance
  • Retirement
  • Vision
  • Dental
  • Life
  • HRA and HSA plan

What is NOT considered a bona fide benefit? Basically, anything that your employer should be providing anyway:

  • Use of a company truck
  • Travel expenses
  • Statutory benefits like worker’s compensation, unemployment compensation, and social security contributions.
  • Tickets to theme parks and other entertainment venues
  • Use of company sponsored cafeterias

Fringe benefit contributions may be paid to an independent trustee or third-party pursuant to a bona fide fund, plan or trust. Fully Insured health plans have been a staple in government contracting. Self-funded plans have recently picked up in popularity, but are owed special attention. For example, unfunded “self-insured” plans, where a contractor typically pays claims out-of-pocket, require advance approval from the DOL’s administrator of the Wage and Hour Division.

So where do bona fide fringe benefit requirements come from? Well, there are two ruling acts that govern these standards for government contractors, at the federal level: The McNamara-O’Hara Service Contract Act of 1965, as amended (SCA) and the Davis-Bacon Act of 1931. States and other localities have multiple prevailing wage laws of their own.

The SCA, perhaps, has the longest reach of the two; the SCA applies to any employees working on a government contract for services valued at more than $2500. Generally, service contractors have minimum hourly requirements for wages and benefits. These hourly requirements for benefits are called fringe rates.

You can check out the rest of our blog for more info on the SCA and SCA compliance!

The Davis-Bacon Act (DBA) applies primarily to construction contracts and requires the payment of locally prevailing wages and fringe benefits. The intention of this piece of legislation is to prevent private contractors from under-bidding the unions.

Still have questions? At The Boon Group, our consultative business development team is specifically trained to answer any questions you or your broker have regarding your benefits and compliance. Reach out to The Boon Group, today!

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