Certified Payroll Fringe Benefits: Cash vs. Bona Fide Plan
— WH347.io Team
The prevailing wage includes two components — a basic hourly rate and a fringe benefit rate. How you satisfy the fringe requirement changes how Columns 6 and 7 of the WH-347 are filled in, and getting it wrong is one of the most common certified payroll compliance errors.
Every wage determination under the Davis-Bacon Act includes two components: a basic hourly rate and a fringe benefit rate. Together, they constitute the prevailing wage — the floor that contractors must meet for each covered classification. But meeting the fringe benefit requirement can be done in two fundamentally different ways, and the WH-347 form is structured to capture both. Getting the distinction right isn't just a form-filling detail — it determines whether you're actually in compliance.
The Two Ways to Satisfy the Fringe Requirement
Under 29 CFR § 5.26, contractors can satisfy the fringe benefit requirement on a Davis-Bacon project in two ways:
- Bona fide plan contributions: contribute the required fringe amount per hour to a bona fide benefit plan — health insurance, pension or retirement fund, vacation accrual, apprenticeship fund, or other qualifying benefits. The plan must meet DOL standards for being 'bona fide.'
- Cash in lieu: pay the fringe amount as additional cash wages directly to the worker, on top of the basic hourly rate. The worker receives the full prevailing wage in cash — basic rate plus the fringe amount — with no benefit plan involved.
A contractor can use both methods simultaneously — paying fringe for some workers through a plan and for others in cash, or even splitting a single worker's fringe requirement between a partial plan contribution and a cash supplement if the plan contribution doesn't fully cover the required fringe rate.
What Makes a Plan 'Bona Fide'?
The DOL's standards for a bona fide benefit plan are set out in 29 CFR § 5.26. In summary, a plan is bona fide if it:
- Is a legally established plan, fund, or program — not an informal arrangement or a promise of future benefits.
- Provides genuinely valuable benefits — health insurance, retirement, vacation, sick leave, life insurance, disability insurance, or similar.
- Does not allow the contractor to recapture contributions for their own use.
- Involves actual, irrevocable contributions to a fund or insurance arrangement — not just a bookkeeping entry.
- Covers workers without excessive eligibility restrictions that effectively exclude most of the workforce.
If your benefit plan is administered through a union trust fund, it almost certainly qualifies. If you're offering company-sponsored health insurance through a commercial carrier, it generally qualifies. If you're offering a 401(k) with employer contributions, it generally qualifies. Informal arrangements — 'we give workers a gas stipend' or 'we pay for their tools' — do not qualify as bona fide fringe benefits.
How to Report Each Method on the WH-347
Frequently Asked Questions
What are the two ways to satisfy the Davis-Bacon fringe benefit requirement?
Contractors can satisfy the fringe requirement by (1) contributing the required per-hour fringe amount to a bona fide benefit plan (health insurance, pension, vacation, etc.) or (2) paying the fringe amount as additional cash wages directly to the worker, known as 'cash in lieu.' Both methods, or a combination, are allowed under 29 CFR § 5.26.
How do bona fide plan fringe benefits appear on the WH-347?
Plan contributions are entered in the fringe benefit sub-column of Column 6 (Rate of Pay). The gross wages in Column 7 should not include those plan contributions, since they are paid to the benefit fund, not directly to the worker. Box 4(a) on the Statement of Compliance should be checked.
How does cash-in-lieu fringe appear on the WH-347?
When fringe is paid as additional cash wages, those amounts are included in the worker's gross wages in Column 7. Column 6's fringe sub-column reflects only plan contributions — not the cash-in-lieu amount. Box 4(b) on the Statement of Compliance should be checked. If a plan covers part of the fringe and cash covers the rest, both boxes may be checked.
What makes a benefit plan 'bona fide' for Davis-Bacon purposes?
A bona fide plan is a legally established, irrevocable arrangement that provides genuine benefits (health insurance, retirement, vacation, etc.) to workers, without allowing the contractor to recapture contributions. Union trust funds, commercial health insurance plans, and 401(k) with employer contributions generally qualify. Informal arrangements, gas stipends, and one-time bonuses do not.
What happens if I claim a plan fringe credit but don't actually make the contributions?
Claiming credit for plan fringe contributions that were not actually made is both a wage violation and a false statement on the WH-347's Statement of Compliance. The DOL can require back wages for the shortfall, and knowingly making false certifications is a federal offense under 18 U.S.C. § 1001.
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