By Thomas Tuckerman:
President Trump and congressional Democrats want to spend $1 trillion to rebuild the nation’s roads, bridges, tunnels, airports and other infrastructure. If even a fraction of the funds are approved by Congress, it could start a boom for construction work and spark a boon for employee benefits.
“Every single governor in this nation has roads, bridges, tunnels and airports, and we want to work together, because we need to replace them, and we need to repair them,” Virginia Gov. Terry McAuliffe said at a recent National Governors Association meeting in Washington. Congress is expected to take up the issue later this year.
Politics aside, the anticipated construction expansion could be a big opportunity for insurance agents and financial advisors who provide retirement plans, life insurance and other employee benefits to employers and employees in the construction industry. It’s an especially opportune moment for those who work with prevailing wage employers.
Prevailing wages are typically paid to those who build roads, bridges, sewer and water lines, and other public works projects. In government contracting, a prevailing wage is defined as the hourly wage, usual benefits and overtime, paid to the majority of workers and laborers within a particular area. Prevailing wages are established by regulatory agencies such as state Departments of Labor for each trade and occupation employed in the performance of public work.
Whether an employer is new to prevailing wage contracts or has been working under one for several years, the questions and issues related to employee benefits are nonetheless complex because of the many rules and regulations. It takes special know-how on the part of agents and other financial professionals to comply with prevailing wage regulations. That’s why it pays to work with an insurer or benefits provider with experience and insight into this marketplace.
For instance, employers typically have discretion over a specific percentage or amount of an employee’s prevailing wage. A portion of employees’ wages can set aside by the employer to buy healthcare insurance, life or disability coverage, contribute to a retirement savings plan or secure other benefits for the employee.
Many employers sponsor benefit plans in lieu of paying additional cash to workers simply for tax benefits. If a portion of wages is used to pay for benefits rather than take-home pay, for instance, the employer reduces its Social Security and Workers Compensation tax obligations. And by reducing those tax burdens, employers are able to be more competitive in the bidding of new jobs. In today’s tight labor market, employers are also using benefits as a tool to attract and retain employees and to boost productivity.
Whole life insurance may be especially appealing in this marketplace as it can simultaneously accomplish several financial objectives. First and foremost, life insurance is the cornerstone of most families’ financial protection plan and is highly valued by many workers. The 2015 MassMutual Employee Benefits Security Study¹ found that 90 percent of American workers said it was “very” or “somewhat” important to have adequate life and/or disability insurance.
But whole life also offers “living benefits” that can be accessed for a myriad of financial needs. The cash value that grows inside a policy is guaranteed, meaning it increases each year, will never decline due to changes in the financial markets, and offers a reliable source of funds – even during economic downturns. It’s an added source of financial flexibility that many workers appreciate.
There are additional benefits for the employer as well. The financial security offered through purchasing whole life policies may help ease workers’ personal financial concerns and improve on-the-job productivity. More than a third (37 percent) of employees report having difficulty managing their finances and 40 percent report being distracted on the job by personal financial issues, according to MassMutual’s study.
Such distractions can take many forms, including time spent at work managing personal financial issues as well as increased absenteeism, use of sick days and leaves from work. Lost productivity alone can be a significant cost. For an employee who earns $50,000 annually, a 10 percent drop in productivity can equate to $5,000 in salary paid for little or no work. That’s a significant hit to the bottom line.
It’s a big reason why more employers are focusing on the financial wellness of their employees, seeking benefit solutions that improve workers’ financial well-being and remove one more distraction from the workplace. In construction, distractions can equate to not only lost productivity but on-the-job injuries, more downtime, and higher Workers Compensation costs.
Meanwhile, there is considerable anticipation about a potential construction boom. The Trump Administration drafted a list of 50 priority projects, including digging tunnels, replacing or repairing dilapidated bridges and highways, replacing outdated river locks, fixing old dams, building new rail lines and airports, and creating a satellite-guided air traffic control system. The plans include modernizing the electricity grid and storing water underground in arid areas.²
Breaking ground on scores of new construction projects both big and small will create more jobs, more wages and, ultimately, more opportunities to provide benefits for those rebuilding America’s infrastructure. For agents and brokers who support contractors in the prevailing wage marketplace, it’s time to strap on your hard hat and go to work.
By – Tom Tuckerman, JD, is a Managing Partner of Fringe Assist, LLC. He can be reached at firstname.lastname@example.org.
¹ 2015MassMutual Employee Benefits Security Study, https://www.massmutual.com/~/media/files/MM-EE-Benefits-Security-Study-Report.pdf
² States Vie to Be Part of Trillion-Dollar Infrastructure Spending Sprees, New York Times, Jan. 25, 2017, https://www.nytimes.com/2017/01/25/us/donald-trump-infrastructure-spending-trillion-dollars-states.html?_r=0