How to Get Your Piece of the Stimulus Package

1. How to Get Your Piece of the Stimulus Package Karen deMontigny, CFP

2. Welcome!

3. Our Purpose • Discover ways tobe more competitive on prevailing wage projects • Uncover ways toreduce wage discrepancieson public to private work • Learn how toreduce payroll taxes and insurancecostson public work • Learn how tohour bank group benefitsand meet cobra requirements • Discover how the owners and highly compensated employees can get more from the company retirement plan

4. Saving Labor Costs on Government Jobs with Certified Payrolls & Davis Bacon Wage Requirements

5. Sample Wage Determination BASEWAGE $30 + FRINGE BENEFIT $10 TOTAL HOURLY WAGE $40

6. Comparison of Hourly Rates

7. The Employer Decides How to Satisfy the Wage Obligation Contractors typically pay the “base” amount in cash and then choose how to pay the “fringe” portion; • Into a vacation fund, • Into an approved apprenticeship program, • Furnish “bona fide” fringe benefits, or • As cash, and have it treated as wages

8. The Problem: • Paying the fringe portion in cash is the most expensive way:

9. Why? • All cash wages subject to payroll burden - F.I.C.A. 7.65% - F.U.T.A .80% - S.U.T.A. 2.0% - Public Liability 2-15% - Workers 10-50% Compensation* The average payroll burden is between 20%-50% *dependent on state regulations

10. Why? • Fringe portion paid as wages in PA must pay time and half for overtime. • Fringe portion paid as wages for Davis Bacon, pay just the fringe rate. • Fringes paid into benefits, pay only the fringe rate.

11. SampleCalculation • Multiply the fringe rate of: $10/hr. • By total project hours worked 10,000 • This equals the total fringe contributions on the project $100,000 • Multiply the fringe contributionsby the assumed % of payroll burden: 25% • Total Payroll Cost: $125,000

12. Solution: The most cost effective way to fulfill the fringe obligation is to provide “Bona Fide”Fringe Benefit Plans

13. What Makes a Fringe Benefit Plan “Bona Fide”? • Specified in writing and communicated to covered employees in writing • Irrevocable contributions • Group benefit plan • Contributions made to a third party or trust • Convey a benefit to the person actually performing the work • Accounted for on an hourly basis (weekly payroll reporting form WH347)

14. Prevailing Wage ContractorSAMPLE WAGE RATE = Base of 25.00 + Fringe of $ 10.00 = Total Wage Rate of $35.00 OPTION #1 Paying Fringe Requirements as Cash Base Wage $25.00 Fringe Amount + $10.00 Total Taxable Hourly Wage $35.00 *Estimated Payroll Tax Burden (11.15%) Workers Comp 0 FICA 7.65% General Liability 2.50% FUTA/SUTA 1.00% TOTAL BURDEN 11% x $35.00= Total Payroll Burden $ 3.85 Total Hourly Wage + $35.00 Total Bid Hourly Wage $38.85 OPTION #2 Providing “Bona Fide” Fringe Benefits Base Wage $25.00 Fringe Amount + $00.00 Total Taxable Hourly Wage $25.00 *Estimated Payroll Tax Burden (11.15%) Workers Comp 0 FICA 7.65% General Liability 2.50% TOTAL BURDEN 11% x $35.00= Total Payroll Burden $ 2.75 Total Hourly Wage + $35.00 Fringe Amount in Plan + $10.00 Total Bid Hourly Wage $37.75 MAKE AN ADDITONAL $1.10PER MAN-HOUR

15. Compare the Union Plan • Employees must be in the union 5 years to be vested. • Funds are held by the union till retirement • Income stream is the only distribution option • No investment control by the employee

16. Your Plan: • All Fringe contributions are 100% vested from day one. • Employees have multiple distribution options, immediate, set time or retirement • Employees can choose lump sum or guaranteed income stream. • Employees can choose from selected funds.

17. Benefits to Employerof a Retirement Plan Simple in Design Cost Effective Employer has Multiple use of Contributions Flexibility Affords Employer Fiduciary Protection Opportunity for Owners and Executives to Participate at Higher Maximums

18. Boost and Offset Prevailing Wage contributions can be used to BOOST the actual deferral percentage of the non-highly compensated employees (NHCE) which in turn increases the amounts the (HCE) can defer. OR • Prevailing Wage contributions can be used to OFFSET profit sharing contributions by the amount of the Prevailing Wage contributions which have already been allocated to the covered employees accounts.

19. Tools to increase Owners Contributions • Safe Harbor Plans • Matching Contributions: met by fringe • Non-Elective Contributions: met by fringe • New Comparability Profit Sharing • Allows classes of employees to receive different percentages

20. How Your Prevailing Wage Contributions Benefit Owners and Top Staff Example #1: 401(k) with Prevailing Wage “Boost” *Prevailing Wage if paid in Cash **Prevailing Wage Used as “Boost” 1If NHCE ADP is <2%, the HCE Deferral % is 2x the NHCE ADP 2If NHCE ADP >8%, the HCE Deferral% is 1.25 x the NHCE ADP

21. How Your Prevailing Wage Contributions Benefit Owners and Top Staff Example 2: Profit Sharing “Offset”

22. Benefits to Employees Pay income tax only on cash wages Pay FICA only on cash wage Employees have individual accounts Option to direct their own investments within a portfolio of stock, bond and fixed income accounts 24/7 access to account information via web or 800# Quarterly account statements Lump sum cash out option 60 days after termination Income at retirement

23. Health and Welfare Programs Available* Full Major Medical Plans Limited Benefit Indemnity Plan Credits vs. Hour Banking

24. Calculating Benefit Credit • Take the annual employer cost • Divide by 1920 hours per year • Give hourly equivalent • Concern is overtime hours, overfunding the benefit • Payout any unused vacation/sick time

25. Hour Bank Accounting Helps Because . . . The required hours of work credit will qualify an eligible employee (and his/her eligible dependents) for (1) calendar month of benefits Employees may accumulate hours of work credit for excess hours worked Avoids possible ineligibility under traditional programs Protects employees from layoffs, inclement weather, etc. Allows employees to bank up to 7 months of health care Allows employer to pay for actual hours worked

26. Hour Bank Example

27. Summary Providing “Bona Fide” Company Benefits will: Reduce your Payroll Tax Burden Make you more Competitive Increase your Profits Equalize Private vs. Public Project Wages Promote Employee Retention

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