5 Common Pitfalls of Fringe Reporting

Understanding common errors in benefit reporting will help you avoid shocking discrepancy letters from payroll auditors about owing unreported benefit contributions to a multiemployer plan.

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Before you submit the next benefit remittance report, read about the following five most common pitfalls in benefit reporting, as observed by an accounting firm that performs over 2,000 payroll audits per year for a variety of multiemployer plans in a wide array of industries.

Pitfall # 1 – Hours Worked Versus Hours Paid

A common pitfall in benefit reporting results from not reporting all eligible hours. There are several variations to this issue, but the most common is known as “hours worked versus hours paid.” Review the benefit section of the applicable collective bargaining agreement (CBA) to determine which types of hours are included for the purpose of benefit calculations. If the CBA states “hours worked,” generally paid sick, vacation, holiday, etc. may be excluded from reporting. However, if the CBA states “hours paid” or states “all hours,” it is likely contributions are required for any hours that are paid but not worked, in addition to worked hours such as straight time, overtime and double-time.

If you need clarifications, don’t hesitate to consult the appropriate personnel.

Matters related to:Who to contact:
Hour types subject to benefits.Plan administrator, local union representative, contractors' association or plan auditor
Specific hour types on payroll – hours worked or hours paid?Controller or payroll specialist

 

Pitfall # 2 – Omitted Weeks

Employers that contribute to benefit plans monthly, based on hours recorded on weekly payroll registers, must ask these three basic questions:

  • How many weeks in a year? 52.
  • How many weeks in a quarter? 13.
  • How many weeks in a month? It depends!

In a weekly payroll scenario, during each calendar quarter there are two 4-week months and one 5-week month, yet one of the most common reporting pitfalls is to overlook or omit hours worked in the fifth week. This issue usually results from applying an incorrect cut-off date during the month, so the key to avoid overlooking a payroll period is by employing a consistent cut-off date. All weekly payroll registers generally have a period end-date and a check date. Select either period end-dates or check dates as your basis and apply this basis consistently each month throughout the year. To facilitate the process, your payroll processor or accounting system may, for example, provide automated monthly reports to consistently reflect hours based on check date occurring during the month.

Matters related to:Who to contact:
Contributions based on hours worked during a “calendar” month.

You may have to use daily timekeeping records or reports, rather than weekly payroll records, to support accurate reporting.

Plan administrator, local union representative, contractors' association or plan auditor

 

Pitfall # 3 – Probationary Periods and Extended Coverage

Some CBAs allow for a waiting period before contributions are due on behalf of an employee, for example, “contributions begin for hours worked after completion of the 90-day probationary period.” Employers commonly fail to commence contributions in accordance with probationary periods outlined in the CBA. The key to avoiding this pitfall is to implement a system for tracking hire dates (or whatever basis required by the CBA) and reporting when probationary periods have been met. Relying on one’s “memory” of an employee’s hire date produces inconsistencies and is difficult to manage. Similarly, if the CBA requires extended contributions to a health care plan on behalf of a sick or disabled employee, be sure to implement a system to track applicable work events and identify when such extended coverage contributions are in order.

Matters related to:Who to contact:
Probationary period or extended coverage.

Be sure to not confuse any probationary periods that do not explicitly reference benefit contributions.

Plan administrator, local union representative, contractors' association or plan auditor
Probationary period untraceable to CBA.Controller or benefit personnel

 

Pitfall # 4 – Report All Eligible Employees

Be aware of the “jurisdiction of work” and “job classifications” covered by your CBA. Compliance audits commonly uncover unreported employees working in classifications that appear to be covered by the CBA. In some cases, these are regular employees that were overlooked. In other cases, employees worked on a part-time basis or performed work through a temporary employment agency or subcontractor. Unless specifically stated otherwise, contributions are required for all individuals performing duties covered by the CBA, regardless of union membership.

Other variations of this issue include failing to report employees at the proper classification (such as reporting a Foreman at the Journeyman benefit level or reporting a Journeyman at the Apprentice benefit level) or reporting at the incorrect area rate for which work was performed.

Matters related to:Who to contact:
Duties and classifications coverage.Plan administrator, local union representative, contractors' association or plan auditor

 

Pitfall # 5 – Reconcile Remittances to Employee Payroll Deductions

Some collectively bargained benefit packages include components that are processed as employee payroll deductions, such as vacation/holiday plans, dues check-off, voluntary 401(k), credit union, or miscellaneous savings plans. The contribution rates for these types of funds typically vary by employee classification or are a voluntary election like 401(k). When processing your trust remittance report, it is important to compare the amount deducted from payroll to the amount remitted to the trust funds. Many employers complete a pre-printed remittance form provided by the trust fund administrator. If the total amounts deducted from the employees’ pay do not agree with the amount calculated on your remittance form, it may be indicative that payroll deductions have not been set up at correct rates for each employee or the rates pre-printed on the remittance form may not be accurate. Taking a few extra minutes to reconcile these reports will help identify issues that may otherwise go unnoticed for months and result in a large audit finding.

Matters related to:Who to contact:
Fringe components processed as employee deductions.

It is common for the Union or other related entity to publish wage and fringe rate sheets that outline fringe components and identify employee deductions.

Plan administrator, local union representative, contractors' association or plan auditor

 

Understanding the common errors in benefit reporting will help you troubleshoot benefit reporting issues and potentially avoid costly audit findings. Periodic internal audits of your benefit reports, based on the five common pitfalls outlined above, will help detect errors and provide confidence in the accuracy of your Company’s reporting.

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