davis bacon plan

[Guest Susan M.]

Hello

I have a 401k plan and there is also a prevailing wage plan (which we do not administer). The participants particpate in both plans.

my question is can I combine these two plans for 401k adp and acp discrimination testing?

Thank you

sue

[Bill Presson]

Hello

I have a 401k plan and there is also a prevailing wage plan (which we do not administer). The participants particpate in both plans.

my question is can I combine these two plans for 401k adp and acp discrimination testing?

Thank you

sue

Whether you can or not, why would you? I assume there are no deferrals or matching contributions in the davis bacon plan, correct?

[rcline46]

Ah, Mr. Presson, you may be able to use the D-B contributions as QNECs to help pass ADP testing, so I would say you would (and can) combine the plans for testing.

[Guest Susan M.]

Yes there is deferral contributions in the prevailing wage plan.

If I use the deferrals that are in theprevailing wage plan in the reg 401k adp test, the plan passes

If I do not the plan will fail.

That is why I want to know if we can combined them

Thank you

sue

[Mike Preston]

If the combined plans pass 410(b) you can combine them for ADP and/or ACP purposes.

There is nothing special about a Davis Bacon plan as far as testing goes. It is usually just a plan that provides heaps (that is a technical term) of employer allocations to those who receive Davis Bacon wages.

[Bill Presson]

Ah, Mr. Presson, you may be able to use the D-B contributions as QNECs to help pass ADP testing, so I would say you would (and can) combine the plans for testing.

Interesting. I've never done that before and was unaware of the use. Guess necessity IS the mother of invention.

Thanks.

[GBurns]

Ah, Mr. Presson, you may be able to use the D-B contributions as QNECs to help pass ADP testing, so I would say you would (and can) combine the plans for testing.

You say "may". Under what conditions and What says?

The employee amount is not elected by the employee, it is part of their wage payment.

[rcline46]

Mr. GBurns - that is the magic of D-B contributions. Yes they are employer contributions, but they are by law 100% vested, and by law May (document issue) be used as QNECS, and what is not used as a QNEC, can also be used to offset employer profit sharing contributions.

Wonderful plans they are. A few other quirks if you are interested in pursueing, and maybe some state law glitches (even in a qualified plan), etc, etc, etc. Still wonderful.

[Mike Preston]

OK, Reed. Spill.

State law issues?

Glitches?

Curious minds want to KNOW!

[rcline46]

Ok Ok. The fact is, the rules for D-B or prevailing wage conditions and applications is somewhat up to the states. SO not only federal contracts, but state contracts can call for D-B/P-W wages. In New York, there is an hours pro-ration required when people have both D-B wages and normal wages, which can cause a crediting of additional hours. There is also a 'hold out' rule for other benefits (which means deposits may be delayed) and actually a vesting rule!

I have heard that Massachusetts (I know it is a commonwealth and not a state!) has some additions to the fundamental D-B rules. So, if you have one of these plans, you should speak with a labor attorney for the state involved, or research the prevailing wage rules for that state. The rules might affect how the amounts are credited. Once actually IN a plan, the plan has to have its own rules.

There might even be a requirement that the plan have an independent trustee!