Davis-Bacon/Prevailing Wage plan vesting

[rcline46]

I have a plan document covering Davis-Bacon participants from Montana. The document provides that if a covered employee is terminated with under 500 hours, the D-B contributions are forfeited, 500 or more 100% vested.

I was under the impression that due to their nature, D-B contributions had to be 100% vested at all times.

Searches in RIA did not help.

Is anyone else aware of the provision, and if so can you direct me to the source?

Thank you.

[Ron Snyder]

When I researched this issue, I was convinced that the rule is that a DC plan must be 100% vested, while a DB plan may impose a vesting schedule. I remember searching the EBSA website and searching for key words to reach this conclusion. However, since ours was a DC plan, I did not save my research. Good luck.

[Everett Moreland]

http://www.dol.gov/esa/whd/FOH/FOH_Ch15.pdf

See pages 37 & 38 of the above document.

[GBurns]

Employee contributions that are part of that employee's wage determination are 100% vested and not forfeitable. After all it is part of the employee's wages that could/should have been paid in cash.

Employer contributions that are not part of the wage determination can be subjected to a vesting schedule since this is not employee money nor was it used to satisfy the wage determination.

[rcline46]

I read the article. Very interesting. The 500 hour rule is a 'forever' not a plan year rule which means if a 'forfeited' employee returns, they continue to earn against the 500 hours, meaning restoration of funds, etc. This is even if they have been gone 15 years!

Administratively this is 'impossible'. So, everyone except the one document I have uses 100% immediate vesting.

Thank you Mr. Moreland for the reference, and I bet a bunch of others will be just as surprised!

[GBurns]

The rules of DBRA do surprise many people.

[Ron Snyder]

On re-reading the publication I should amend my earlier assertion: it is possible to employ a vesting schedule in a DC plan, although fraught with problems. And it would be pointless (so far as compliance with D-B or SCA is involved), since no savings may be realized.

With a DB plan it is possible to employ a vesting schedule, with the caveat that forfeitures not be used to reduce employer contributions (which is what forfeitures do by definition in a DB plan). Therefore, the benefits provided to remaining plan members should be designed based on the assumption of a part of the funding's coming from forfeitures. (This is common in union plans.)

[Kirk Maldonado]

Everett Moreland:

Thanks for that post.

I've found it difficult to find much useful information on Davis Bacon plans. Do you know of any treatise, article, or website that would be helpful?

[Everett Moreland]

http://www.oalj.dol.gov/libdba.htm

Kirk:

The above site has links to some useful information.

I don't know of a useful treatise or article, but I don't work with Davis-Bacon plans. Perhaps another board user knows of one.

[Tom Poje]

Amy Cavanaugh included some info (27 qusetion and answers) on Davis-Bacon Plans in the Coverage and Nondiscrimination Answer Book Supplement (Chapter 22). Plus reproduced some of the USDept of Labor Davis-Bacon Resource Book 11/2002 (those parts that pertain to retirement plans) in Appendix N (about 6 pages).

I plead ignorance of any knowledge of Davis-Bacon plans as I have never worked on them.

[Kirk Maldonado]

Tom and Everett:

Thanks for providing that information.