What is a Benefit Trust Plan?
Typically, they are defined as a multiple employer benefit plan trust fund, sponsored by a trade association or employer organization. We administer multiple employer benefit trust funds such as 501(c)(9), 501(c)(17) and 501(c)(5) trusts governed by ERISA. These trusts provide benefits such as health and welfare, retirement, vacation/holiday pay, supplemental unemployment, and craft training.
One example is a construction trade association sponsoring a health and welfare trust fund to cover the employees of its member employers. The member contractors would subscribe to the 501(c)(9) trust and benefit from a larger pool of insured employees. The benefits to the employer are also the reduced fiduciary liability, which is typically assumed by the trustees of the multiple employer trust fund. Ease of administration in working with a professional third party administrator, all tax and governmental reporting is handled by the trust accountant, auditor and administrator.
What is an Hour Bank and how does it work?
An hour bank attached to a Health and Welfare plan allows employees to contribute at a set hourly rate each month and accumulate future coverage when the hours worked in a given month are more than what is needed to fund one month of coverage. For instance, if the plan requires 130 hours of contributions for a month of coverage and an employee works 150 hours in a month, the contribution for the extra 20 hours goes into their “hour bank”. The hour bank accumulates and is used if an employee falls short of the 130 hours in a future month. This is particularly helpful in uncertain economic times and also with seasonal work.
What is annualization and how does it apply to me?
Annualization is a term used to describe the requirement to allocate hourly contributions for certain benefits to all hours worked, rather than only to hours worked on public works projects subject to prevailing wages. Not all benefit contributions are subject to annualization. For instance, contributions to certain retirement plans can be made based on prevailing wage work only. On the other hand, if you are making hourly contributions to a medical plan for an employee working on both public and private jobs, you are required to contribute equally for hours worked on both. This is an annualization requirement.
What is a Supplemental Unemployment Benefit plan?
The Supplemental Unemployment Benefit Plan (SUB) is a bona-fide benefit plan which complies with Federal Davis-Bacon and California Prevailing Wage regulations. The SUB plan allows an employer to contribute fringe benefit dollars directly to the plan on behalf of their employees. The employee is then able to receive supplemental unemployment benefit payments when they meet eligibility through a reduction in hours or loss of employment. The plan benefits the employer by reducing their payroll burden on prevailing wage work and it benefits the employee, by allowing them to receive their money in the form of a benefit payment when they need it most. Unlike contributions to a 401(k) plan, the employee will not be penalized for using this money if they find themselves unemployed prior to retirement age.