Prevailing Wage off-set

[Guest Ken C]

I have a 401(k) plan that makes a Prevailing Wage contribution in addition to a 3% Non-elective Safe Harbor contribution. The adoption agreement specifies that the prevailing wage contribution may be used to off-set a profit sharing contribution and that the Prevailing Wage contribution is a Qualified Non-Elective Contribution. Looking at prior yr it appears the prior TPA used the Prevailing Wage contribution to off-set the 3% Safe Harbor Non-Elective.

I can't find any support for that position or any thing to prohibit that.

Any one have an idea where to look for guidance on same??

[John Feldt ERPA CPC QPA]

I have seen this language in some IRS-approved prototype plan documents. Perhaps another option would be to offset the Davis Bacon requirement by any amounts already allocated as a safe harbor nonelective. Since both sources (Davis Bacon and Safe Harbor nonelective) are 100% vested and neither has any allocation conditions, there's ultimately no difference in the end. If you have an IRS-approved prototype that allows this, I see no worries in doing exactly that.

[AndyH]

I looked into this a few years ago and there are some posts on this topic. My recollection is that I concluded that such an offset may be ok for plan purposes, but the offset could violate labor law.

I know this is ambiguous. It is meant only as a caution to cast a wider net than you may have otherwise been inclined to do.

[John Feldt ERPA CPC QPA]

Well, on the question of "Anyone have an idea where to look for guidance on same" - I have found none.

Okay, if you have a labor agreement already in place that indicates that you will provide the 3% nonelective and an agreement that you will also provide the Davis Bacon requirements, these agreements need to be reviewed to see if they allow each other to offset.

Or, perhaps AnyH is alluding to something more than even this? Perhaps laws exist that would not allow to offset at all?

[R. Butler]

We have an with the 3% SHNEC & the prevailing wage offset. The Corbel prototype allows for prevailing wage contributions to offset the 3% SHNEC. Plan sponsor is being told that that is permissable for jobs subject to prevailing wage, but the previaling wage contributions can't be used to offset the SHNEC on jobs not subject to prevailing wage. For example:

Participant earns $30,000; $25,000 on jobs subject to prevailing wage & $5,000 on jobs not subject to previaling wage.

Prevailing wage contribution for the employee is $8,000

Plan sponsor is being told that it is permissable to use the $8,000 to offset the 3% SHNEC on $25,000 earned on jobs subject to prevailing wage, but that they can't use any of the $8,000 to offset a 3% SHNEC on the $5,000 earned on jobs not subject to prevailing wage.

I can't find anything that says that? Can anyone point me to a resource that says that?

Assuming that it is correct that the prevailing wage cannot be used to SHNEC's on money earned in non-prevailing jobs, does the plan sponsor need to go to an individually designed document if they want to continue to apply prevailing wage money to the 3%? regardless of what labor law says, I don't see that the Corbel document allows it.

Thank you for any guidance.