Supplemental Unemployment Benefit Plan (SUB Plan)
A SUB Plan is a Bona Fide fringe benefit plan approved by the Department of Labor and the Internal Revenue Service. A Supplemental Unemployment Benefit Plan is a financial tool used by Open Shop Prevailing Wage Contractors to reduce labor costs. This reduction enables a contractor to use these savings in any number of ways. Some use it as a way to lower current and future bids. Others use it to generate more profit. Regardless, it is a method of paying the fringe portions of the prevailing wage to the field employees.
It is a plan used when an employee is assigned to a project that is subject to the Davis-Bacon Act, Service Contract Act and/or State Prevailing Wage Law. Fringe dollars are paid into an approved trust on behalf of each participating employee rather than paid on an employee’s paycheck. These dollars are then released immediately back to the employee upon a qualifying event. Qualifying events include either Under-Employment or Unemployment of the employee.
Employer Benefits of SUB Plan
Wages paid on the paycheck are subject to payroll taxes and workers compensation premium. An Open Shop Prevailing Wage Contractor has a choice of how he/she pays the fringe components of the prevailing wage. Either on the paycheck as cash or through bona fide benefit plans such as a SUB plan. The average range of effective payroll tax and insurance premium savings a contractor gets, reflected in an hourly amount is between $2.00 and $7.00 per hour. This can be a significant savings per man hour when computed over the length of a job, the number of field employees and type of crafts a contractor hires.
- Payroll taxes including FICA, Medicare and SDI are eliminated from the amount of fringe taken off the paycheck.
- Workers Compensation Insurance and potentially General Liability Insurance are also reduced based on the amount of fringe taken off payroll.
- Provides for more competitive bidding and more profit as a result of less tax and less insurance premium paid by the contractor.
Employee Benefits of SUB Plan
The field employee also eliminates his/her share of payroll taxes.
- Field Employees get cash when they need it most – during periods of Under-Employment, Unemployment, Holidays, Sick Days, etc.
- SUB Plan benefit payments are made in addition to State Unemployment Insurance benefits.
- All dollars are invested into fiduciary approved money market accounts.
Our innovative SUB plan is a leader in the industry because it was created with a declining fee schedule. Because of this, your field workers will receive more income through the use of our SUB plan versus our nearest competitors. This declining fee schedule along with the flexibility of use is what makes our SUB plan unique.
- Under-Employment is defined as when an employee works less than 173 hours in any calendar month.
- All earnings and forfeitures are pooled for the benefit of all employees.
- All required withholdings and reporting are made for the employees.
- Benefit payouts are made directly from the plan trustee to the employees.
For more information on SUB Plans, call 760-208-2506