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Prevailing wage cross-tested plan. What's in the rate group test?


MR

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If you have a prevailing wage (davis-bacon) plan with an offset profit sharing formula that also happens to be new comparability, when performing the rate group test, would you include the davis-bacon contribution that was used to offset the participant's profit sharing contribution. For example, if a participant would have received a profit sharing allocation of $2,000, but received davis-bacon contributions of $5,000, his actual profit sharing contribution would be zero. In the rate group test, would this participant's contribution be zero or $2,000? To me, it should be $2,000, since this is the amount that was used as an offset.

opinions?

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Am I missing something here? Why wouldn't you use $5,000 for the average benefits test? This is the total allocation that the participant receives. I would use it for testing purposes.

The fact that it is really an "employee contributed" employer contribution is irrelevant.

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Yes, for the average benefits portion of the test, you'd use all contributions from all plans, but for the rate group portion of the test, you'd typically use only the non-elective contributions. I have received a couple of opinions since my original message and the consensus is that you'd include in the rate group test the contribution the participant would have received, even though it was offset by his prevailing wage contributions. Agree?

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Assume that an employee works 50% of his time on Davis-Bacon projects and 50% of his time on non-Davis Bacon projects and receives a profit-sharing allocation of $2000.

The Dol takes (as of the last time that I dealt with this, which was a while ago)the position that only $1000 of the profit-sharing contribution counts for Davis-Bacon purposes because the employee spent only 50% of his time on Davis-Bacon work.

If the profit-shariong plan is based solely on Davis-Bacon work (as in employees doing no Davis-Bacon work get no allocation), the employer is able to take credit for Davis-Bacon purposes for the full $2000.

If the $2000 allocation in the Davis-Bacon plan is being used to help a non-Davis-Bacon plan pass a 401(a)(4) or 410(B) nondiscrimination test (for a different plan) , I believe that the DoL could take the position that the employer is getting a benefit (other than complying with Davis-Bacon rules) out of the $2000 allocation, and as a consequence, the employer is entitled (in my example) to only $1000 of Davis-Bacon credit, not $2000.

In the original question, if the employee is working 100% on Davis-Bacon jobs, his rate group is $5000. However, if he is working less than 100% on Davis-Bacon jobs and if the employer needs to give him a $5000 contribution to comply with Davis-Bacon rules, his rate group is zero.

Does anyone agree or disagree or have any authority to support or oppose my postion?

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  • 7 years later...

Is there a good comprehensive source of information on Davis Bacon and how it applies to plans. I have information gathered from different sources including Benefits Links Q & A column, DOL, and old ASPA class tape, etc. I would like something the ties it together better. Any ideas?

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Haven't really found a great resource.

Amy Cavanaugh answerd a few questions here:

http://benefitslink.com/modperl/qa.cgi?db=qa_davisbacon

and she put some questions in the Coverage and Nondiscrimination Answer Book (27 questions)

In Appendix L some information on compliance is reprinted (pages 19 -25 of DBRA Compliance Principles) from a particular section towards the end of:

http://www.abc.org/user-assets/Documents/G...esourceBook.pdf

this is a 255 page document.

I think if you have insomnia or live in a padded cell, or maybe if you are stranded on a desert island somewhere it might prove valuable reading.

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  • 7 years later...

Question edited and updated on 7/15/16:

In the spirit of this thread as related to prevailing wage plans and cross-testing, here's a question -

Plan consists of 401k, safe harbor 3%, ps, prevailing wage.

Prevailing wage is immediate eligibility, 401(k) 1 yr, profit sharing is 2 yr wait

Question is about participants with less than 1 yr who receive only prevailing wage contributions - must they meet the min gateway requirements?

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