Since 1989, Contractor’s Choice has provided Hour Banking which is an accounting system that grew out of the need to assist the Prevailing Wage or Service Contract Act employer to be able to:

• Compete on a level playing field with union contractors
• Bid more competitively and save money for both the employer and employee
• Have a fully insured bona fide benefit plan
• Take credit on an per man hour basis for the H&W fringe contributions
• Allow for annualization  and to have an stagnant hourly equivalent for the cost of the benefit
• A third party for those contributions to go to in an irrevocable manner.  Once contributed, the employer cannot receive those contributions back to the company.  The contributions are then designated employee benefit or retirement dollars.
• Allow for the “reasonable assumption” that the employees will reap the benefit of these dollars in the near future. 

State Prevailing Wage Annualization was part of AB1646 which went into effect in California on July 1, 2001.  This law requires all prevailing wage contractors to contribute the same for all hours worked, for both public and private hours.  When working public works jobs, these dollars come from the fringe benefit dollars and the employer/employee get an immediate tax credit;   when working private, these dollars come from the employer.  Premium payments made by the employer are a company expense that the company’s CPA can take as a deduction at the end of the year. 

Neither Davis Bacon nor California requires that the employer contribute a set dollar amount per fringe benefit called “lined item” or sometimes referred to as “fringe buckets”.  The employees must reap the benefit of the entire package either in cash wages or a combination of wages and benefits.  The training is the only area where the employer has to contribute the exact amount to an approved apprenticeship program or to the California Apprenticeship Standards Board using form CAC2 http://www.dir.ca.gov/DAS/DASCAC2.pdf.

The remaining fringe benefit dollars can be pulled together and the health is calculated first and then the remainder is sent to other plans including retirement plans, being careful not to run the risk of over funding those plans.  If there are extremely high fringe benefit dollars available, we are able to provide really rich benefit plans including medical, dental vision, extra life, etc.  The remainder of the fringe dollars may then be contributed to a retirement program that accepts prevailing wage contributions.

Fringe benefit dollars are part of the employer’s bids or contracts and the employer may mandate coverage for their employees.  The employees that have comparable group coverage else, can elect to have their entire fringe benefit dollars contributed to their retirement plan.  Benefit plans are chosen and the rates are provided on an hourly basis based on the “benefit level” that an employer chooses. This is the total number of hours that an employee has to work to qualify for the benefit.  When we are putting in both a health and retirement plan we start from the health and work backwards to the pension.  This is because the health contribution is a fixed annualized hourly amount that is based on the benefit level.

Our employer groups have always been told to pay for all hours worked in order to use an hour bank.  Public works dollars cannot be used to subsidizes private work, thus if a contractor contributes at least employee only for all hours worked, then the employee can accumulate and utilize their hour bank continuously. 

This is normally between 130-172 hours per month necessary to qualify for the benefit.  Some employer groups always work full time hours and overtime.  Those groups that do not want their employees to bank excessive hours would set their hour bank for 140-160 hours.  Groups that would like their employees to bank at least one month’s worth of coverage every quarter would set their hour bank at 130.  If they worked full time, the employee would have 40 hours to carryover each month.  The amount in the employee’s hour banks is drawn upon when there is no work or a weather related delay when an employee does not have enough hours worked in the month to pay for benefits

The carriers we work with are well aware of how we work and we have the reputation of Contractor’s Choice behind what we do.

Each contractor is required to submit Certified Payroll reports to their Contract Officer or General on each job.  This report shows all distributions of the fringe benefit dollars.  Each group submits to us a contribution report that shows all hours worked (for Service Contract this is all hours up to 40 per week/2080 per year) times the hourly rate need for the coverage to equal the total contributions for each employee.  This is turned into premium by our Administration with any excess dollars remaining in the individual employee hour banks.  If an employee has hours in his bank and doesn’t work the full hours needed for the benefit, then the Administrator can draw from their bank to continue their coverage.  Each month the group gets an accounting of who is on benefit and how many dollars/hours they have banked and the process is repeated monthly. 

Employees never lose the benefit of their hour banked dollars and terminated employees who have money left in their hour bank would be able to request that their remaining hour bank dollars be used in the following ways:

• Employees are notified of their rights under COBRA and are sent their election notices as well.  If an employee elects COBRA their balance can be forwarded to CONEXIS to continue their benefits
• If they are short of hours/dollars to pay for one month’s worth of premium, then the employee can elect COBRA, self pay the difference between what is banked and what is owed.
• Can request a refund if they prove comparable replacement coverage.
  • Then the employee would submit this proof along with a written request for the refund.
  • Money would be refunded to the employee and they would receive a 1099 at the end of the year 

Please remember that this money has been earmarked for a health benefit plan, and it is the industry standard that these dollars be used towards this type of plan.  These dollars can not be sent to the pension plan.