Davis Bacon ER contribution Offsets

[tjw572]

I have a plan that uses the Prevailing Wage contributions to offset the Employer Contributions.  The plan has safe harbor matching contributions and a profit sharing contribution.  Can the prevailing wage contributions offset both contributions (if there is enough available) or does the offset limit you to 1 type of ER contribution to offset?  I can't find anything definitive on this.  Our testing software (DATAIR) only uses it for one and kicks it out of the other depending on which the PW is chosen to offset.

[CuseFan]

i don't think you can offset match, which are contributions under 401(m), only similar employer non-elective contributions under 401(a) such as safe harbor non-elective, profit sharing or DB.

[Mike Preston]

The provisions dealing with Davis-Bacon contributions are extremely broad. I would be surprised (but not shocked) to learn that they couldn't be used to fund a match.

[Bill Presson]

No cite, but I've never seen it offset the match.

[Tom Poje]

I know little of Davis-Bacon plans, however the write-up by these folks would seem to indicate for Davis-Bacon you have base pay and fringe benefit, and it's the fringe benefit that can be put into the plan. therefore, just by the nature of the beast I'd think that fringe benefit would apply to all workers, thus it wouldn't be a match contribution 

http://www.consultrms.com/res/uploads/media//Shifting-Davis-Bacon-dollars-into-Plan.pdf

 

they also have a list of contributions which mentions safe harbor nonelective contributions but no mention of "You could also apply this to safe harbor match":

http://www.consultrms.com/res/uploads/media/Davis-Bacon-Plans-10-4-08.pdf

 

 

[Jason Sperfslage]

On 3/23/2017 at 3:49 PM, tjw572 said:

I have a plan that uses the Prevailing Wage contributions to offset the Employer Contributions.  The plan has safe harbor matching contributions and a profit sharing contribution.  Can the prevailing wage contributions offset both contributions (if there is enough available) or does the offset limit you to 1 type of ER contribution to offset?  I can't find anything definitive on this.  Our testing software (DATAIR) only uses it for one and kicks it out of the other depending on which the PW is chosen to offset.

If the plan was designed properly and the fringe contributions are made properly, they absolutely should be counting as offsets for both your Safe Harbor and your profit sharing contributions. 

I work exclusively in the design, testing, and compliance of prevailing wage retirement plans, if anyone has additional questions let me know. 

 

Jason Sperfslage

jsperfslage@beneco.com

[Belgarath]

And FWIW, Sal says, "A qualified plan may offset Davis-Bacon amounts against any other allocations provided under the plan. For example, the Davis-Bacon contribution might help satisfy the safe harbor contribution obligation under a safe harbor 401(k) plan..."

[John Feldt ERPA CPC QPA]

Based on some comments I heard (quite some time ago) from some folks at SunGard (now FIS), the IRS had some court cases where Davis Bacon was offsetting the match. If I recall correctly, they said the prevailing wage contract officials were okay with that offset, but the IRS felt the anti-conditioning rule, IRC 401(k)(4), was being violated somehow. I think that was SunGard's explanation (best I remember) as to why their document did not allow the prevailing wage amounts to be used to offset the match.

[tjw572]

Thanks everyone for the responses.  Our document is SunGard protoype and it just references offsetting Employer Contributions

[justanotheradmin]

I have a related question - I can start a new topic thread, but since there were some good comments here, I am hoping folks will chime in. 

PW plan is Top heavy. 

PW is immediate, but plan also allows deferrals and SH after 1 YOS. SH is offset by PW for those employees who are eligible for SH. 

Does the PW (particularly to those who are not yet eligible for SH) trigger a minimum TH contribution?

If the plan was Def + SH only doc is clear that no TH min is needed (even if say def were immediate and SH was 1 YOS), but it doesn't address TH min with the addition of PW.

[Mike Preston]

There are no special rules vis-a-vis TH for PW.  As far as the Internal Revenue Code is concerned, a PW contribution is just another non-elective employer contribution.