Jump to content
Sign in to follow this  
Guest zimmer

Minimum coverage - some employees covered by Davis-Bacon Act already

Recommended Posts

Guest zimmer

My company employs 10 salaried and 30 hourly-paid workers. The hourly employees are non-union but are covered by the Davis_bacon Act i.e paid "prevailing wage as dtermined by the Department of Labor. The prevaling wage calculation includes contributions for pension and other fringe benefits. Since the prevailing wage calculation already includes pension benefits, do I have to cover these employees in a defined benefit plan?

Share this post


Link to post
Share on other sites

As I understand Davis-Bacon, you have to demonstrate the employee's total compensation (wages + benefits) is at least equal to the prevailing wage. So it seems to me you could include them in the defined benefit plan and then "take credit" for funding their pension benefit by reducing their wages by an appropriate amount.

If you want to exclude them from the DB Plan, I imagine you'll have to demonstrate that the covered group satisfies 410(B). Based on the employee counts, it sounds like that will be a problem. Also, I deal primarily with DC Plans so I'm not sure on this point - but isn't 401(a)(26) still an issue for DB plans?

[This message has been edited by LCARUSI (edited 09-15-98).]

Share this post


Link to post
Share on other sites
Guest zimmer

Thanks for the input. I thought I had a coverage problem. My client has been operating the plan for about 8 years without covering the hourly people. Any thoughts on correcting the problem? VCR or CAP would likely be prohibitively expensive since the make-up contributions would in my experience be required going back to day one.

Share this post


Link to post
Share on other sites

I don't see any alternative to making a large contribution to the plan since any correction is going to include adding these poeple back in and, since it is a defined benefit plan, funding for their retirement benefit.

The mechanics of the correction methodology within the EPCRS correction program (APRSC, VCR, CAP) will depend on the specific circumstances, status of plan document, etc.

Share this post


Link to post
Share on other sites

You may actually not have a coverage problem; it depends on your employee data.

You may be able to use the general test under 401(a)(4) to meet the coverage and non-discriminiaton requirements. It depends on what retirement benefits you are providing your salaried employees, how many of them are highly compensated employees, how old are the employees, etc.

Based on your raw numbers (10 salaried employees covered by a plan and 30 hourly employees not covered by a plan), it could be difficult for this approach to work. But it depends on the numbers and is not as bad as VCR/CAP, etc.

Good luck.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.
Sign in to follow this  

×
×
  • Create New...