Davis Bacon Plan/401(k) Plan

[MarZDoates]

Currently my client sponors two plans: a prevailing wage plan and a 401(k) Plan.

Can the 401(k) plan be merged into the prevailing wage plan? If so, can the plan have different eligibility requirements for the 401(k) portion and prevailing wage portion? (It is my understanding that the prevailing wage plan must provide for immediate eligibility and 100% immediate vesting.)

If they terminate the 401(k), is the prevailing wage plan considered a successor plan?

Thanks,

m

[A Shot in the Dark]

By Davis Bacon Plan, I assume you mean a qualified retirement plan (like a profit sharing plan) that has prevailing wage provisions in the Plan.

If the above is true, you could amend the 401(k) Plan to allow for prevailing wage contributions and any other requirements and then merge the two plans.

Davis Bacon/Prevailing Wage is not a plan type. It is one source of employer contributions.

To have a plan provide for prevailing wage contributions, a plan is not required to have immediate eligibility, although the plan can certainly provide for that. A plan can certainly have differing eligibility requirements for that particular source of contribution than other types of contributions.

[12AX7]

The employer could lose full credit of the David Bacon allocations to the plan if immeidate eligibility and vesting are not plan provisions. I would not necessarily make a recommendation to change those provisions without proper counsel advising the employer. I agree that the plans can be merged mid-year if otherwise not a SH (k). If it is later decided to terminate the (k) plan, I would consider spinning off the D-B assets if not desired to create a distributable event for that source.

[MarZDoates]

Thanks for the input. The client was using us to do the admin on their 401(k) and another firm for their other plan. I have not seen the other plan document, but according to the source codes on the 5500 it is a P/S plan. The plan name indicates "prevailing wage plan".

They are moving their 401(k) away from us to the other firm and transferring the assets to the other plan. I say good luck with that, because I know there are some gnarly issues with the 401(k) that the client would not correct....against our recommendations.

I just want to make sure I do the right thing on my end to cma.

[12AX7]

Sounds like you got the better part of the deal !