davis bacon prevailing wage plan

[Guest pensiondoc]

There hasn't been terribly much written on the above.

Does anyone have any experience with these types of plans?

I have a live situation. Who detrmines whether the employer adopts a MP or a PS? Is it so stated in the PW agreement? MUST a third party be the trustee? Under what circumstances can we have 5 year cliff vesting, if any, or do we have to go immediate? Can we use a standardized prototype?

Thanks.

Steve

[Guest Laura]

The one Davis Bacon plan I've worked on before had similar cumbersome features: full and immediate vesting, an hourly formula, money purchase plan (req'ed contribution). I didn't design it; I inherited it. Because this design is so undesirable, I'm guessing it's required. I'm not sure of the authority though and I don't even know which government agency has jurisdiction. Good luck...

[Guest ESOPwizard]

A Davis Bacon plan may be a P/S plan.

It must have immediate vesting and a third

party trustee. I can't imagine how you could

use a prototype.

[Guest boetgerinc]

McKay Hochman offers a Davis Bacon Prototype Plan, which we have purchased and used.

[Guest TRIPLEBY]

The Davis Bacon Act can be found at 40 USC 276a. It requires payment to workers on federal projects equal to the prevailing wage rate paid to workers in the area in which the job is performed. The law is administered by the DOL. The law also requires the payment of prevailing pension, welfare and other amounts as determined by the Sec. of Labor. The law does allow the employer to pay the fringe benefit amounts in cash instead of to a plan. There is a Revenue Ruling 75-241, that says that any amounts paid in cash are deemed taxable wages to the employee. As a result, some employers set up 401k plans and allow the employees to defer their own contributions instead of setting up a MP or PS plan. The problem with this approach is that the wages are subject to FICA, and there may be a significant extra cost to the employer. There is a company called Associated Prevailing Wage Contractors, Inc. that sponsors Master MP, Ps and 401k Davis Bacon plans. I have written regular MP and PS plans that have a special contribution and vesting section for Davis Bacon contributions. Note that often the contractors use the same employees for Davis Bacon projects and non-Davis Bacon projects, so you may want to cover pay from both sides. This approach also helps for testing purposes.

[Guest ESOPwizard]

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want to cover pay from both sides. This approach also helps for testing purposes.>>

Question: Assuming that employees are working part of the year on Davis-Bacon projects and part of the year on non-Davis Bacon projects,

may the employer use Davis Bacon P/S or MP benefits to help him pass a 401(a)(4) general test or a 410(b) average benefits percentage test

that includes non Davis-Bacon benefits? If the employer wants to take full credit for Davis Bacon purposes for the contribution, don't the

Davis Bacon benefits have to be something that the employee receives in addition to normal benefits? If the employer wants to use the Davis

Bacon benefits to support extra benefits for HCEs, won't he need (for Davis Bacon purposes) to prorate the Davis Bacon benefits based on the

number of Davis Bacon hours worked by the employee? For example: If an employee works 500 Davis Bacon hours and 1500 non Davis Bacon hours,

and if all of his benefits are used in an average benefits percentage test, I believe that only 1/4 of his P/S or MP allocation may be used

for purposes of determining whether he was paid the Davis Bacon wage. If the benefits were not used in nondiscrimination testing (assuming

none of the Davis Bacon employees were HCEs) then all of the benefits (paid only to those employees doing Davis Bacon work)could be used for

purposes of determining whether the employees were paid Davis Bacon wages.

[Guest JBaird]

How are contributions calculated? Is the ER required to contribute to a separate plan? Can the contributions go to same plan? How are discrimination trests affected? Is there authority on how to calculate contributions/benefits and where to make them? If same plan, is amendment necessary to accomodate Davis Bacon contributions?

[Guest pensiondoc]

Contributions are predetermined under the prevailing wage agreement, it is usually a schedule by types of workers and will be $x per hour X comp.

Discrimination only comes into play if there are any HCE's. The regular pension qualification rules apply,

Don't know what you meean by "can contributions go to same plan". Plan is funded the way a regular plan is funded.

I wouldn't be as concerned with DOL as I would with the State if this is a State plan and State contract. In New York, the State comes in to audit and make sure contributions are made timely.

Plan can be disqualified if contribs not made on time. I believe if it's a state contract, contributions have to be made at least quarterly. You do not have the option of the 75 days after plan-year-end for a make -up from the prior year.