Another Davis Bacon Question

[Laura Harrington]

We are the TPA for an employer who sponsors a money purchase plan. The only contributions made to the money purchase plan are prevailing wage fringe contributions.

The employer would like to give the employees the option of receiving their prevailing wage fringe benefit in cash or have it contributed to the plan (or a combination thereof).

I know that the employer can satisfy the prevailing wage fringe by making an additional cash payment to the employee or by making a contribution to a plan, but they can allow the employee to choose between the two?

To me this screams CODA as I do not know of any exception to the CODA rules for Davis-Bacon plans.

[rcline46]

My understanding is that the EMPLOYER determines how the fringe benefit money is spent. The employee does not have a choice.

[Laura Harrington]

My understanding is that the EMPLOYER determines how the fringe benefit money is spent. The employee does not have a choice.

That is my understanding as well.

I think the only way to accomplish what they want to do is to setup a 401(k) plan. They then increase everyone's hourly wage by the prevailing wage fringe amount and then let employees choose how much to defer into the plan. The 401(k) plan would not even be a Davis Bacon plan since from the standpoint of satisfying the Davis Bacon requirements, the employer would be using the cash option.

Unfortunately this means they will owe FICA/FUTA on all of the prevailing wage fringe, but that is the price they will have to pay in order to accomplish their objective.