No Change to the Service Contract Act Minimum Health & Welfare Amount in 2016!

Blog
August 12, 2016

On July 28, 2016, the Department of Labor (DOL) announced that there will be no increase to the prevailing health and welfare (HW) fringe rate under the McNamara-O’Hara Service Contract Act (SCA). The hourly HW amount will remain at $4.27 an hour.

This relieves contractors of the need to request a price adjustment on SCA-covered contracts due to a HW change. Contractors should still pay attention to newly incorporated wage determinations (WD) on SCA-covered contracts, as DOL is in the process of issuing new WDs containing increased prevailing wages. For several years, DOL did not increase wages on WDs because there was no source to base wage increases on. DOL is now issuing WDs with wage increases based upon the Occupational Employment Statistics (OES) Survey. Please see our blog for more information on these changes.

Special Circumstance: Contractors performing SCA-covered contracts in Hawaii should note that there has been a change to the HW. The Hawaii Prepaid Healthcare Act (HPHCA) mandates that most employers provide health insurance coverage to their employees. Under Section 2(a)(2) of SCA, fringe benefit payments that are required by state law may not be used towards the HW requirement. As a result, contractors performing work in Hawaii are subject to a reduced HW amount if they are providing the required health insurance to their employees. Effective July 29, 2016, this HW amount increased to $1.78 from $1.69.

For more information, please see Department of Labor All Agency Memorandum 221. For assistance in understanding SCA and the various compliance requirements, please contact Barbara Connell at bconnell@aronsonllc.com or 240-364-2657.