Davis Bacon Limit for HCE's in ADP testing

[kevind2010]

I understand there is a 10% cap for counting Davis Bacon/Prevailing Wages in the ADP testing, however does that limit only apply to NHCE's (i.e., are all HCE Davis Bacon contributions counted in the HCE's deferral percentages for the ADP test??), or does that 10% limit apply across all employees?

[PensionPro]

What is the authority for the 10% limit?

[Tom Poje]

are you thinking of 1.401(k)-2(a)(6)(iv)(D)

but that pertains to disproportionate QNECs

[kevind2010]

are you thinking of 1.401(k)-2(a)(6)(iv)(D)

but that pertains to disproportionate QNECs

Yes, doesn't this basically say that in order to not have disproportionate QNEC's, you can only use Davis Bacon QNEC contributions that do not exceed 10% of an NHCE's compensation in ADP testing? Or am I misunderstanding that?

[fiona1]

Yes - the rule applies to NHCE's. The Final 401k/m regs limit the amount of a QNEC that can be included on the ADP/ACP test for NHCE's if the contributions are disproportionate. HCEs are not limited.

For a Davis Bacon plan, the disproportionate QNEC is the greater of:

- 10% of compensation or

- two times the representative contribution rate

[kevind2010]

Yes - the rule applies to NHCE's. The Final 401k/m regs limit the amount of a QNEC that can be included on the ADP/ACP test for NHCE's if the contributions are disproportionate. HCEs are not limited.

For a Davis Bacon plan, the disproportionate QNEC is the greater of:

- 10% of compensation or

- two times the representative contribution rate

Thank you! On a related note, the plan we administer allows HCE's to receive Davis Bacon contributions - hence my original question. The plan fails ADP testing. The one HCE who is due to receive a refund has an excess contribution that is higher than the amount he actually deferred for the year due to the Davis Bacon contributions he received. Does the refund still come entirely from the deferral source or must a portion of it come from the Davis Bacon money type?