This document provides an overview of the Service Contract Act (SCA) for DynCorp International HR staff. It explains that the SCA requires contractors to pay service employees according to applicable wage determinations from the Department of Labor. These determinations set minimum wages and fringe benefit rates by job classification. Contractors must track health and welfare benefit contributions and expenses to ensure compliance is met either for individual employees or by contract. Excess contributions may be allocated to employee retirement accounts on a quarterly basis. The document includes examples of tracking contributions and expenses for both individual and average contracts.

1. Service Contract Act (SCA) Overview
for DynCorp Intl. (DI) HRG

2. Service Contract Act
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3. What is the Service Contract Act (SCA)?
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 McNamara-O’Hara Service Contract Act (“SCA”) generally provides
that non-exempt employees working on service contracts and
subcontracts be paid and receive benefits according to the applicable
Wage Determination (WD).
 SCA applies to services performed in the United States, including U.S.
territories.

4. Wage Determinations (WDs)
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 An SCA wage determination (WD) is a list of minimum wage rates and
fringe benefits issued by the DOL based on wage survey data or other
information for a locality.
 Minimum hourly wage rates are listed by classification of work
performed and required fringe benefits are described following the list of
classifications.
 When incorporated into a federal service contract, a WD requires a
Contractor to provide service employees no less than the specified wages
and fringe benefits.

5. Individual vs. Average Contracts
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Employees working on Individual, Davis-Bacon and Related Acts
(DBRA), and CBA contracts have individual “Premium Reserve
Accounts” (PRAs) within the trust.
Individual Contracts (Odd WDs)
Average Contracts (Even WDs)
Employees working on Average contracts share a contract-level
“Premium Reserve Account” (PRA), because H&W compliance is
measured per contract.

6. Sample Wage Determination
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- If WD ends in odd number = Odd (Individual) WD
- If WD ends in even number = Even (Average) WD

7. Comparison of WDs
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* DOL rate as of June 30, 2015
SCA Individual
(Odd WD)
Davis-Bacon and
Related Acts
(DBRA)
CBA SCA Average
(Even WD)
H&W Rate $4.27 / hr* Varies Varies $4.27 / hr*
Applied to Hours
Worked or Paid?
Paid Paid Varies Worked
Maximum (cap)
to Hours?
Yes
40 hrs/wk
No Varies No
New WDs still
being issued?
Yes Yes Yes No
H&W compliance on
individual basis?
Yes Yes Yes No

8. Fringe Benefits Compliance
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9. Fringe Benefits Requirements
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 An hourly amount for “Health and Welfare” (H&W rate)
- Currently set at $4.27 per hour
- Issued nationwide (One rate for all localities, except HI)
- Revised every July via DOL All Agency Memorandum
 A specified number of paid holidays
 A specified number of vacation weeks, depending upon total length of
service with the contractor and any predecessors

10. H&W Rate Increases
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 It is the Contracting Officer’s responsibility to ensure that contractors are
notified of these rate increases and that the new rates are paid on the
contracts option date(s).
 If a contractor decides to pay these new H&W rates based on the effective
date on the Memorandums (prior to the option dates), they will not be able
to recover the difference on these new rates under Price adjustment.
 Salera-GSA Team does not advise contractors to increase wages or fringe
benefits unless the Wage Determination, CBA or H&W Memorandum has
been modified into their contract by the Contracting Officer, with an
effective date.

11. Fringe Benefit Compliance Methods
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Following are the approved methods that are allowable by the DOL
(29 CFR 4.175 ) to meet fringe benefit compliance:
1) Pay cash-in-lieu of benefits
2) Make retirement plan contributions
3) Directly pay for qualified benefits
4) Establish a bona fide Plan or Trust to contribute H&W obligation
irrevocably, which in turn pays for qualified benefits
Employers may use multiple methods, as long as the total value of the fringe
benefits meets or exceeds the H&W requirement.

12. Examples of Benefits that Meet
H&W Requirement
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 Medical / Dental / Vision Insurance
 Life / AD&D Insurance
 STD / LTD Insurance
 Sick Leave Pay (if not required by WD)
 Employer Contributions to 401(k) Savings Plan
 Educational Assistance (if not required by job)
 Paid Time Off in excess of WD requirement
 Jury Duty, Military, Bereavement, and other paid leave in excess of what is
required by law
The DOL does not provide a specific list of benefits
that meet the H&W Requirement.

13. Examples of Benefits that Do NOT
Satisfy the H&W Requirement
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Benefits required by Wage Determination
 Vacation and Holiday Pay
Statutory benefits (if required by federal, state, or local law)
 FICA
 Unemployment Insurance
 Worker’s Compensation
 Paid Time Off
Other
 Relocation
 Incentive Awards
 Uniforms (not required by the WD)
 Professional or club membership dues

14. Premium Reserve Account (PRA)
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15. H&W Compliance Tracking Workflow
Employees working on Individual contracts have Individual
“Premium Reserve Accounts” (PRAs) within the Voluntary Employees Beneficiary Association (VEBA) trust.
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H&W fringe benefit contributions (hours x H&W rate) and payroll
deduction amounts are allocated into an employee’s PRA on a
monthly basis.
Premium Deductions (Fully Insured and Fully Insured Equivalent)
are made from PRAs to pay the benefit costs associated with the
employee’s benefit enrollment.
Remaining H&W balances accumulate until PRA reaches its
designated 3 months threshold. The threshold is determined by
the employer and unique to each employee’s enrollment.
Once an account exceeds the PRA threshold, all excess H&W dollars
are transferred to the designated surplus account, in DI’s case the
Retirement Account, on a quarterly basis. Surplus account and
transfer frequency is determined by the employer. Employees will
receive a quarterly statement including the retirement transfer
amount, if applicable.
Upon termination, any remaining PRA funds are transferred to the
employees’ retirement account (approx. at end of quarter after
termination).
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16. Individual Contracts Examples
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Employee A Employee B Employee C
Waive Medical Medical Employee-only Med/Den/Vis Family
Period Monthly Quarterly Monthly Quarterly Monthly Quarterly
Hours (based on 35 hrs/wk) 151.49 454.48 151.49 454.48 151.49 454.48
Contributions
Employer Contributions ($4.27/hr) $647 $1,941 $647 $1,941 $647 $1,941
Employee Contributions - Medical $0 $0 $0 $0 $900 $2,700
Employee Contributions - Dental $0 $0 $0 $0 $100 $300
Employee Contributions - Vision $0 $0 $0 $0 $30 $90
Sick Paid Leave (in excess of WD) ($40) ($120) ($40) ($120) ($40) ($120)
Total Contributions $607 $1,821 $607 $1,821 $1,637 $4,911
Benefits and Other Expenses
Medical $0 $0 $450 $1,350 $1,350 $4,050
Dental $0 $0 $0 $0 $100 $300
Vision $0 $0 $0 $0 $30 $90
Basic Life and AD&D $5 $15 $5 $15 $5 $15
STD and LTD $22 $66 $22 $66 $22 $66
Total Benefits and Other Expenses $27 $81 $477 $1,431 $1,507 $4,521
Premium Reserve Summary
Beginning Balance $0 $0 $0
Contributions $1,821 $1,821 $4,911
Benefits and Other Expenses ($81) ($1,431) ($4,521)
Ending Balance Before Surplus Allocation $1,740 $390 $276
Surplus Threshold Setting (months) 3 3 3
Monthly Benefit Costs $27 $477 $1,507
Surplus Threshold $81 $1,431 $4,521
Surplus Allocation (Employee) $1,659 $0 $0

17. H&W Compliance Tracking Workflow
Employees working on Average contracts share a Contract-Level
“Premium Reserve Account” (PRA) within the Voluntary Employees Beneficiary Association
(VEBA ) trust.
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H&W fringe benefit contributions (hours x H&W rate) and payroll
deduction amounts are allocated into the contract’s PRA on a
monthly basis.
Premium Deductions (Fully Insured and Fully Insured Equivalent)
are made from PRA to pay the benefit costs associated with all of
the employees’ benefit enrollments.
Remaining H&W dollars accumulate until the contract PRA
reaches its designated 3 months threshold. The threshold is
determined by the employer and based on total monthly benefit
costs for all employees within the contract.
Once an account exceeds the PRA threshold, all excess H&W
dollars are transferred quarterly to the employees’ Retirement
Account, on a pro rata basis (Employee hours worked divided by
total hours worked by all employees across contract). Employees
will receive a quarterly letter by mail if they are eligible for a
retirement transfer.
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18. Average Contracts Example
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Contract (1000 EEs) Contract (1000 EEs) Contract (1000 EEs)
Q1 Q2 Q3
Period Monthly Quarterly Monthly Quarterly Monthly Quarterly
Hours (based on 35 hrs/wk) 151,492 454,477 151,492 454,477 151,492.47 454,477
Contributions
Employer Contributions ($4.27/hr) $646,871 $1,940,613 $646,871 $1,940,613 $646,871 $1,940,613
Employee Contributions - Medical $0 $0 $0 $0 $0 $0
Employee Contributions - Dental $0 $0 $0 $0 $0 $0
Employee Contributions - Vision $0 $0 $0 $0 $0 $0
Sick Paid Leave (in excess of WD) ($40,000) ($120,000) ($40,000) ($120,000) ($40,000) ($120,000)
Total Contributions $606,871 $1,820,613 $606,871 $1,820,613 $606,871 $1,820,613
Benefits and Other Expenses
Medical $360,000 $1,080,000 $360,000 $1,080,000 $360,000 $1,080,000
Dental $10,000 $30,000 $10,000 $30,000 $10,000 $30,000
Vision $3,000 $9,000 $3,000 $9,000 $3,000 $9,000
Basic Life and AD&D $5,000 $15,000 $5,000 $15,000 $5,000 $15,000
STD and LTD $22,000 $66,000 $22,000 $66,000 $22,000 $66,000
Total Benefits and Other Expenses $400,000 $1,200,000 $400,000 $1,200,000 $400,000 $1,200,000
Premium Reserve Summary
Beginning Balance $0 $620,613 $1,200,000
Contributions $1,820,613 $1,820,613 $1,820,613
Benefits and Other Expenses ($1,200,000) ($1,200,000) ($1,200,000)
Ending Balance Before Surplus Allocation $620,613 $1,241,226 $1,820,613
Surplus Threshold Setting (months) 3 3 3
Monthly Benefit Costs $400,000 $400,000 $400,000
Surplus Threshold $1,200,000 $1,200,000 $1,200,000
Surplus Allocation (Contract) $0 $41,226 $620,613

19. Average Contracts Example
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Example Employees Surplus Allocation
End of 3rd Quarter
Employee A Employee B Employee C
Waive Medical Medical Employee-Only Med/Den/Vis Family
Employee Hours 454 300 480
Contract Hours (all Employees) 454,477 454,477 454,477
Surplus Allocation - Contract $620,613 $620,613 $620,613
Employee Hours as % of Contract Hours 0.10% 0.07% 0.11%
Employee Surplus Allocation (Q3) $621 $434 $683

20.  The DOL does not require employers to communicate to employees
how they achieve Fringe Benefit compliance.
 Employees often misunderstand which hours count towards the
employer’s Fringe Benefit obligation.
o Example: Individual WD method – max of 40 hrs/wk
 Employees often misunderstand how the qualified benefits count
towards their employer’s Fringe Benefit obligation.
 Best practice for employee communications is to provide regular
statements or other communications with the employee’s specific
H&W compliance reconciliation.
Employee Communications
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21.  Employees under the Individual Contract receive Premium Reserve Account
(PRA) statements by mail for every quarter.
 Employees under the Average Contract receive a “Health and Welfare
Reconciliation” letter by mail for every quarter.
Employee PRA Statements
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22. Sample Quarterly PRA Statement for
Employee on Individual Contract
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Amount DI has contributed to your 401(k) for the Quarter
Amount of your payroll deductions for the Quarter
Employer H&W Contribution amount
From Contributions Total Above
Amount Allocated to Your Retirement Account
From Benefits and Other Expenses Total Above

23. Sample Quarterly How to read Guide for
Employee on Individual Contract
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24. Sample Quarterly Letter for Employee on
Average Contract
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John Doe
123 Main Street
Anytown, USA 11348
RE: Q1 2016 Health and Welfare Reconciliation
Dear John:
GSA recently concluded the reconciliation of the DynCorp’s Q1 2016 Service Contract Act (SCA) Health and Welfare
(H&W) contributions against the cost of employee benefits for your SCA contract. DynCorp’s H&W contribution
obligation is based on all employee hours worked, and the total cost of benefits includes Medical, Dental, Vision,
Basic and Supplemental Life, Basic and Supplemental AD&D, Short Term Disability, and Long Term Disability.
DynCorp’s H&W obligation for this period exceeded the cost of benefits, therefore surplus contributions, if you are
eligible, have been deposited into your T. Rowe Price 401(k) account. Your T. Rowe Price 401(k) deposit amount of
$500 is based on your number of hours worked, relative to the total hours worked for all employees on your SCA
contract. Please note that you are ineligible for surplus contributions if you did not work any hours for pay dates
from December 2015 to February 2016.
If you do not have an existing 401(k) account with T. Rowe Price, one will automatically be set up in your name. You
may contact T. Rowe Price at 1-800-922-9945 or www.troweprice.com.
If you have questions regarding this H&W calculation, please contact GSA at 1-800-250-2741 or
customersupport@gsanational.com.
Thank you,
Government Service Administrators

25. Contact Information
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Thank you for taking the time to view this presentation!
Please direct employees with any questions to contact GSA. They can
be reached under:
Phone: 1-800-250-2741
Email: customersupport@gsanational.com