As the national sales manager for Builders and Contractors Trust (BCT), one of the original pioneers in the sponsorship of tax-advantaged Supplemental Unemployment Benefit (SUB) Plans, Rachel Snyder often gets asked by contractors, “What is this plan all about, and how can it help my business and my workers when it comes to prevailing wage jobs?” I sat down with Rachel and asked her to answer some of the more pressing questions about SUB Plans and what makes BCT in particular so advantageous when dealing with prevailing wage contracts.
MCS: Rachel, can you briefly describe the plan: How does it work in conjunction with bidding on government contracts that fall under the Davis-Bacon Act, which requires compliance with the stated prevailing wage determination?
Rachel: It’s actually very simple. With a SUB plan like BCT, a contractor is allowed to take the difference between the stated prevailing wages/fringe benefits and the employees’ total compensation package and pay it into the plan instead of in additional hourly pay. The benefits contributed on behalf of the employees are treated as a fringe benefit and invested in interest bearing money market accounts. For a contractor, this results in significant cost savings over meeting the prevailing wage by paying additional hourly pay, labor burden, and taxes, plus bids become much more competitive.
MCS: How about employees? Do they have access to their benefits?
Rachel: Absolutely! The BCT Benefit Plan is a win-win scenario and is designed to work in favor of employees. The contributions made by employers are fully vested benefits that can be accessed quickly during any week an employee works less than 36 hours. The employee can request to receive their funds via direct deposit to their bank account or in paper check form. The plan provides a sense of security for employees and their families when work is unavailable, and makes for a very attractive construction unemployment benefits package for laborers who work so hard on prevailing wage jobs.
MCS: What does it cost an employer to participate in BCT?
Rachel: BCT does not charge any fees to participate in the supplemental unemployment plan. The only cost an employer is required to incur by law is that related to the filing of a 5500C once per year, for annual reporting of employee benefit plans.
MCS: So if there is no cost to the employer, how does BCT pay for expenses?
Rachel: BCT uses a small fee from the contributions submitted by each employer on behalf of their employees to pay the administrative expenses for the supplemental unemployment benefit plan. In addition, each employee is charged a $2 per month maintenance fee. The maintenance fee is offset by the interest earned by the trust account. The interest rate coincides with simple bank interest rates.
MCS: Are there risks for employees to be aware of if their company participates in a SUB Plan?
Rachel: Employees can feel confident that their money is safe and secure in a SUB Plan. Their benefit dollars are held in interest bearing trust accounts backed by a fully insured and bonded bank. They are guaranteed a return on their accounts, and there is no risk of loss of value due to market conditions, unlike some other types of investments. Plus, employees may draw benefits from the account in addition to any state unemployment benefits for which they may be eligible. With a SUB Plan like BCT, the account is also portable. The account stays in the employees’ names if they leave their employer. If they become eligible for unemployment, they may draw benefits. If they are hired by another participating employer, the account will move with them.
MCS: What is the ramp up period for a contractor to get started with a SUB Plan like BCT?
Rachel: All in all, setup is very minimal. Of course, as with any new program, there will be a small amount of added work for the staff to get the SUB Plan set up and running smooth. At BCT, our customer support provides all the initial forms required to get started and we also work directly with payroll departments to answer any questions that may arise. Once the initial setup is completed, the actual administration of the account becomes a normal part of doing business. And, just within the past year, BCT has implemented an exciting new paperless method for employers to administer all contributions and payouts to and from the plan on behalf of their employees. Everything is done on our secure website, which eliminates the need for faxing and emailing. In addition, all employees who register for an online BCT account can also view and print their account balances and activity online at any time.
MCS: Why would a contractor choose a SUB Plan like BCT over a Retirement Plan?
Rachel: Of course there are choices out there, and it’s always a good idea for a contractor to sit down with their legal and financial advisors to review the pros and cons of any type of plan, but a SUB Plan, such as the one BCT offers, has some have significant advantages over a traditional retirement plan option. For one, a SUB Plan like BCT pays out up to 26 weeks or 6 months of pay based on the currently hourly rate of pay, whereas with a traditional retirement plan, the IRS places limits on the amount that can be paid. In addition, with a SUB Plan, an employee qualifies for a distribution in the event of any unemployable time period, but with a traditional retirement plan, employees are able to get funds only after 60 days of which there will be a 10-percent early distribution penalty assessed by the IRS. ■
For More Information:
For a personalized cost savings analysis for your business at no cost, contact Rachel Snyder with BCT at 877.WAGE.BCT, or visit
Modern Contractor Solutions, October 2013
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