MITA has learned that several contractors have recently received a “Certified Payrolls, Deficiency Notice” letter (Notice) from MDOT. Although we have heard that it is not explicitly stated in the Notice, the reference to certified payrolls submitted after June 1, 2018 seems to imply the deficiencies are most likely related to the OE 324 Fringe Benefits Funds refusal to accept fringe benefit contributions made by certain MITA contractors, and the return of any previously submitted contributions back to June 1, 2018.
As a contractor who receives this Notice, you have 30 calendar days from the date of receipt of the Notice to provide MDOT documentation that demonstrates how you distributed the OE 324 returned contributions such that you will be in compliance with the prevailing wage provisions of the contract. It is MITA’s understanding that the 30-day response duration may be extended if the Engineer and contractor mutually agree in writing prior to the expiration of the initial 30-day notice duration.
Given the current situation, where the OE 324 Fringe Benefit Funds are refusing to accept fringe benefit contributions for your operating engineer employees, you have limited options in how you distribute the “fringes” element of the published prevailing wage.
For contractors working on Davis-Bacon prevailing wage required projects:
· You can pay the entire fringe benefit dollar amount in cash directly to the employee. These fringe benefit dollars are thus treated just like wages and are subject to all the required payroll taxes.
· You can contribute the fringe contributions (other than the vacation fringe, which is taxable, and thus must be paid on the employee’s weekly check) to a qualified retirement plan, such as a 401(k). An employer who chooses to utilize a 401(k) plan to satisfy certified payroll under Davis-Bacon will first need to consult with their own 401(k) plan administrator to ensure that the plan they choose to utilize is structured appropriately.
· You can consider the Builders and Contractors Trust (BCT) plan (www.bctbenefitplans.com) as another qualified plan option that provides a supplemental unemployment benefit to the employee.
If you are working on a project that still requires State of Michigan prevailing wages (i.e. bid before the repeal of state prevailing wage), your fringe distribution options are the same as those outlined for Davis-Bacon prevailing wage above.
For contractors working on non-Davis-Bacon prevailing wage required projects:
· Since there are no prevailing wage requirements, you may simply put the fringe contributions (other than the vacation fringe, which is taxable and must be paid on the employee’s weekly check) into a segregated escrow account (i.e. separate from your other corporate funds) until some sort of resolution is reached.
Based on MITA legal counsel input, the depositing of fringes into a qualified plan or the paying of all fringes in cash is not a trigger for withdrawal liability.
You should note the reference to “non-compliance damages” in the Notice. When assessed, these damages could be very significant. Therefore, it is imperative that you respond to the Notice and communicate with your Engineer.
As there are very significant dollar amounts involved with the returned OE 324 contributions, it is also strongly suggested that you be very deliberate and take your time with your decisions.
MITA continues to research other options and will forward any new information as it becomes available.
If you have any questions, please contact Mike Nystrom, Executive Vice President/Secretary, at mikenystrom@thinkmita.org or at 517-896-1493, or Glenn Bukoski, Vice President of Engineering Services, at glennbukoski@thinkmita.org or at 517-256-0741.
