Prevailing wage fringe benefit exemption

My employer is stating that since I am enrolled in the company 401k program with a company 3% match, that they do not have to give me any of the $14.00 an hour pension fringe benefit when working on prevailing wage jobs. The only way they will give me that $14 hour is if I defer to enroll in the 401k program then they will add that amount on to my paychecks. Example- my coworker deferred to enroll in the 401k program and is paid $44 an hour on prevailing wage jobs but has no money contributed to a retirement account, whereas I am enrolled in the 401k program so I am paid $30 an hour on the same job, then 3% of my check goes into my retirement account and my employer matches that. Is this the correct way that this works? They do not have to give me any of the pension fringe benefit if they are doing a company match?

They owe it to you one way or another, although most sponsors will throw it as plan benefits where possible to avoid running payroll taxes on it.  If it's not going to be a match as you're not signing up to do 401(k) from your paychecks, for you they potentially could make it your "profit sharing contributions" for the year.  Again, it avoids the related social security/medicare taxes, but you'd get your prevailing wage obligation through the plan that way. 

Not sure of exactly how this benefit/pay practice works but look at the "contingent benefit rule" under IRC § 401(k)(4)(A) and Treas. Reg. § 1.401(k)-1(e)(6).  

401(k)(4)(A) provides: 

A cash or deferred arrangement of any employer shall not be treated as a qualified cash or deferred arrangement if any other benefit is conditioned (directly or indirectly) on the employee electing to have the employer make or not make contributions under the arrangement in lieu of receiving cash. The preceding sentence shall not apply to any matching contribution (as defined in section 401(m)) made by reason of such an election.

Treas. Reg. § 1.401(k)-1(e)(6) adds:.

“(6) Other benefits not contingent upon elective contributions—

(i) General rule. A cash or deferred arrangement satisfies this paragraph (e) only if no other benefit is conditioned (directly or indirectly) upon the employee's electing to make or not to make elective contributions under the arrangement. The preceding sentence does not apply to—

. . . .

(ii) Definition of other benefits. For purposes of this paragraph (e)(6), other benefits include, but are not limited to, benefits under a defined benefit plan; nonelective contributions under a defined contribution plan; the availability, cost, or amount of health benefits; vacations or vacation pay; life insurance; dental plans; legal services plans; loans (including plan loans); financial planning services; subsidized retirement benefits; stock options; property subject to section 83; and dependent care assistance. Also, increases in salary, bonuses or other cash remuneration (other than the amount that would be contributed under the cash or deferred election) are benefits for purposes of this paragraph (e)(6). The ability to make after-tax employee contributions is a benefit, but that benefit is not contingent upon an employee's electing to make or not make elective contributions under the arrangement merely because the amount of elective contributions reduces dollar-for-dollar the amount of after-tax employee contributions that may be made. Additionally, benefits under any other plan or arrangement (whether or not qualified) are not contingent upon an employee's electing to make or not to make elective contributions under a cash or deferred arrangement merely because the elective contributions are or are not taken into account as compensation under the other plan or arrangement for purposes of determining benefits.”

While I don't deal to any great extent with Davis-Bacon plans, the answer to this question is pretty clear.  The prevailing wage requirement has two parts: cash wages and fringe benefits.  The minimum for each is calculated separately.  An employer may reduce the fringe benefit component by paying cash wages in excess of the minimum, but not vice versa.

In HrdWrkr's case, the cash wage component is $30 an hour, and he receives $30 an hour in cash.  Since there are no wages in excess of the minimum, the employer must provide fringe benefits with a cost of at least $14 an hour.  Elective deferrals don't count toward the fringe benefit minimum.  If they did, the cash wage would be less than $30.  The same payment can't count toward both prevailing wage components.  (Aside from that, three percent of $30 is quite a bit short of $14.)  Hence, the fringe benefit component must be satisfied by matching or nonelective contributions. 

It's also true, as Artie M. points out, that paying workers at a higher rate when they don't make elective deferrals (what HrdWrkr believes is happening at his work place) would violate the contingent benefit rule and disqualify the cash or deferred arrangement.