Federal Contractors - THE ADVANTAGES OF POOLING SCA AND NON-SCA BENEFIT CLAIMS ?SHOULD NOT BE OVERLOOKED

There is a common misconception that prevents many federal contractors from maximizing cost effectiveness in the allocation of H&W dollars on SCA contracts. Contractors can better leverage H&W dollar spending for the good of both employees and employer, including situations where the employer has a mix of SCA and non-SCA employees.

Insurance carriers rely on risk pooling, where premiums paid by employers or other parties are collected by insurers to pay claims, spreading financial risk across a large group. Group health insurance, under this arrangement, evens out financial risks associated with adverse health events.?

Federal contractors offering medical coverage, a key fringe benefit under the Service Contract Act (SCA), often opt for self-insurance to avoid ancillary costs. This method, allowed by SCA regulations, mandates fringe benefit contributions to be irrevocably paid into a trust. Contractors should not overlook the advantages of risk pooling and may consider extending this to non-SCA employees for benefits such as better security, portability, simplified reporting, stabilized costs, cost-effective administration, and reduced ERISA fiduciary responsibilities.?

While extending an SCA fringe benefit trust to cover non-SCA employees can bring benefits through economies of scale and risk spreading, pooling claims does not exempt contractors from SCA obligations, requiring proper record-keeping and segregation of hours for covered work.?

An SCA fringe benefit trust managed by professional administrators provides security to covered employees. A contractor that chooses to self-insure its medical fringe benefits for SCA employees should consider extending the trust to include the funding of the benefits to non-SCA employees. This pooling of claims to a common trust will result in benefits to the contractor and covered employees from the economies of scale and the spreading of financial risk.

Choosing the right fringe benefit administrator is paramount. Contact GSA National to review your options and learn how trust pooling could help your bottom line .