Employees with Prevailing Wages

[coleboy]

While working on the year-end for a new safe harbor 401k, the census and salary information that we received form the payroll company reflected some employees with "On Call" and "Prevailing Wage" Earnings. Our document uses W-2 earnings as the definition of comp.

Not sure what "on call" earnings are but the prevailing wage, I believe, is under the Davis Bacon Act. Should this have been addressed when setting up the plan? Do we just ignore the prevailing wage and only use their W-2 earnings?

[ETA Consulting LLC]

This would be a distinction that the client would need to make.  Prevailing wage income is part of W-2.  So, if they give you W-2, it should include those prevailing wage earnings.  The Prevailing Wage income that is on the report should merely be a distinction of part of the W-2 that was already provided, but you'd need to verify that with the client.

Good Luck!

[ERISAAPPLE]

On call is w-2 as well.  

[Larry Starr]

4 hours ago, coleboy said:

While working on the year-end for a new safe harbor 401k, the census and salary information that we received form the payroll company reflected some employees with "On Call" and "Prevailing Wage" Earnings. Our document uses W-2 earnings as the definition of comp.

Not sure what "on call" earnings are but the prevailing wage, I believe, is under the Davis Bacon Act. Should this have been addressed when setting up the plan? Do we just ignore the prevailing wage and only use their W-2 earnings?

Unless the plan has been set up to deal with prevailing wage jobs in specific ways, then there is NOTHING special about prevailing wage and it is just part of the W-2 wages.  The same is true with "on call" wages; they will be reflected in the W-2.  What can be unique about on call wages has to do with how many hours they get credited with, but if they are already over 1000 (as is almost always the case), it is not an issue.  You do obviously need to look at the definition of compensation established in the plan document to make sure you are properly accounting for compensation for plan purposes, but if it is just plain W-2 earning as you note, then both of these should already be in the W-2 and would be counted for  plan purposes.

[Mike Preston]

We just received a census from a client that showed a suspicious number of people with 168 hours. Turns out they were on-call for one week (and only one week during the entire year).  

[Belgarath]

I realize that Davis Bacon contributions can be used to offset employer contributions that are otherwise required if the plan document is set up to do that. However, for deferral purposes, I assume if compensation is defined as W-2, and there is no exclusion for Davis Bacon wages, then deferrals must be withheld, right? And if Davis Bacon comp is excluded, it would be subject to compensation ratio testing, which might very well fail?

Let's say total compensation for the payroll for an individual is $2,000. But of this $2,000, the employer contributes $200 to profit sharing, under the Davis Bacon agreement. This means that if Davis Bacon wages are not excluded for deferral purposes, the employee's compensation for deferral purposes is $1,800, right?

[Bri]

The plan sponsor is basically tasked with rewarding its employees with the extra amounts per the Davis-Bacon rules.  Sometimes that means additional wages, sometimes it means additional benefits like health or retirement.  When the D-B obligation is met via additional wages, then sure, they're on the W-2.  If they're used to provide plan benefits instead, then they'd not be wages.

So in your case, it sounds as though their regular wages and total D-B obligations come to $2,000 for the week. In that case, if $200 is going to be used for a plan contribution, and notwithstanding the use of the D-B for any additional welfare benefits or what-have-you, then $1,800 would be the wages component that'll eventually reflect on their W-2 at year end.

And if your deferral definition of compensation includes full wages, then you'd want to apply the employee's election on the $1,800.

[Belgarath]

Gracias. Thanks for confirming.