Many employers have been analyzing whether it's more cost effective to provide medical insurance for their workers or to pay the penalties that will begin to be assessed in 2015 if they do not offer medical insurance. When you look at the numbers, there's no comparison. By offering bona fide fringe benefits, employers not only save on payroll taxes but also avoid costly penalties for non-compliance with the Affordable Care Act (ACA).
Many contractors currently pay the fringe as additional cash wages, thinking it's the easiest way to comply with prevailing wage requirements. But doing so results in a significant loss of savings on payroll burden. This is because every dollar used to provide "bona fide" fringe benefits is exempt from assessments such as FICA, FUTA, SUTA, general liability insurance and, in most states, workers compensation insurance. Over the life of a contract, this can add up to hundreds of thousands of dollars saved.
Beginning January 1, 2015 there will be an additional cost for paying the fringe as additional cash wages: penalties for failure to comply with the law. Contractors with 50 or more employees will be fined $2,000 per employee if they do not comply with this provision of the ACA. This amount may be adjusted upward to help alleviate the costs the federal government will incur to implement ACA.