Prevailing Wage Plan - Accrual Requirement Allowed?

[Guest notapensiongeek]

Not sure what forum to post this question in, so I'll start here:

We are taking over a prevailing wage plan (no other contributions go into this plan, they have a separate 401(k) Plan that addresses other money types). I haven't done one of these in many years! This is probably a dumb question, but I'll ask it anyway.

The existing plan document has no age / service requirement to enter the plan (whew!) but has a 1,000 hour requirement to receive a davis-bacon contribution. If the participant doesn't work 1,000 hours during the plan year, the davis-bacon contributions get paid to the employee directly (through payroll), and don't run through the plan. Is this ok? I was under the impression that there can't be an accrual requirement to receive an allocation in this type of plan.

Any input on this would be greatly appreciated.

Thanks!

[Mike Preston]

Davis Bacon plans typically have no age/service/entry/vesting barriers because the plan sponsor saves significant $$ by converting compensation dollars into benefit dollars (no workman's comp, no FICA). Why your plan put up a barrier is anybody's guess. Maybe there are too many folks with very small hours and the administration costs exceed the savings? The DavisBacon Act requires that the plan sponsor spend a certain amount on benefits or provide it as compensation. If the plan provides a barrier, then compensation is what results. Might be very bad plan design. Might be very good plan design. Not enough facts.