Davis Bacon Pension Plan, what exactly is it? How do you get free no obligation plan proposals for your company and are you a good candidate to receive these great fringe benefits?
WHAT IS IT?
Your employer has chosen to participate in the Davis-Bacon Pension Plan and Trust on your behalf. This is an IRS Approved Retirement Program created solely for your benefit. Below is the act description from Department of Labor.
| The Davis-Bacon Act, as amended, requires that each contract over $2,000 to which the United States or the District of Columbia is a party for the construction, alteration, or repair of public buildings or public works shall contain a clause setting forth the minimum wages to be paid to various classes of laborers and mechanics employed under the contract. Under the provisions of the Act, contractors or their subcontractors are to pay workers employed directly upon the site of the work no less than the locally prevailing wages and fringe benefits paid on projects of a similar character. The Davis-Bacon Act directs the Secretary of Labor to determine such local prevailing wage rates. In addition to the Davis-Bacon Act itself, Congress has added prevailing wage provisions to approximately 60 statutes which assist construction projects through grants, loans, loan guarantees, and insurance. These "related Acts" involve construction in such areas as transportation, housing, air and water pollution reduction, and health. If a construction project is funded or assisted under more than one Federal statute, the Davis-Bacon prevailing wage provisions may apply to the project if any of the applicable statutes requires payment of Davis-Bacon wage rates. |
HOW DO I BENEFIT?
HOW MUCH IS CONTRIBUTED?
The level of contribution varies based upon your trade and site location. The amount is set by the Department of Labor.
WHERE IS MY MONEY INVESTED?
Your funds are deposited to a variable annuity account at Lincoln National Life Insurance
IS THERE AN ANNUAL FEE?
No, there are no annual fees.
WHEN CAN I GET MY MONEY?
After you have left your current employer, retire, become permanently disabled or upon death. A Summary Plan Description will be given to you after the first deposit to your account. Please read it for full details.
HOW DO I GET MY MONIES?
Contact the Plan Administrator in Redmond, WA at (425) 889-8855 to request the forms necessary to receive your Retirement Plan Distribution. If you are under age 59 1/2 you will be subject to a 10% federal excise tax on all distributions.
CAN I TRANSFER MY ACCOUNT TO AN IRA?
Yes, this can be done without IRS penalty.
WHAT ARE MY FINANCIAL BENEFITS?
Social Security Taxes will never be paid on these monies, PLUS, you postpone paying income tax on the deposits and earnings until the funds are withdrawn from the Trust..
Example:
If you had $6,000./yr deposited to your account and you earned 8%/yr, your account value in 10yrs = $86,919 and in 20yrs = $274,571.
PLEASE READ YOUR SUMMARY PLAN DESCRIPTION FOR FULL DETAILS OF THE PLAN AND TRUST
Here is the information concerning the combination of the 401(k) & Davis-Bacon plan..
- 401(k) matching example
employer will match dollar for dollar of a participant’s contribution for the first 3%. Employer contribution will be a max of 3%. - Davis-Bacon Contribution
the fringe benefit will be deposited in the Davis-Bacon Plan & Trust. This will be considered an employer contribution. - Davis-Bacon Plan & Trust Offset
any contribution made to the Davis-Bacon Plan & Trust will be offset against the employer 401(k) match and any Profit Sharing Contribution.
Now the offset generated by the Davis-Bacon Plan & Trust will help to minimize or remove the 401(k) match to any prevailing wage employees. Look at the example below to see how the contribution is applied to different employees.
Employee | Job Description | Davis-Bacon Plan & Trust | 401(k) Employee Deferral | Required 401(k) Matching |
A | Administration Staff | 0% | 2% | 2% |
B | Field Employee PW and Non PW | 2% | 4% | 1% |
C | Field Employee all PW | 25% | 0% | 0% |
D | Owner | 0% | 15% | 3% |
For Employee A - administration staff. They do not have a Davis-Bacon contribution, and have only deferred 2% of their salary to the 401(k). Under the matching requirement, MGE Underground would make a 2% contribution into their 401(k) retirement plan.
Employee B – works on one prevailing wage job in the year and defers 3% of their salary to the 401(k). The Davis-Bacon deposit accounts for 2% of the total wage. The 401(k) match would be the 3% salary deferral minus any DB Contribution (2%) so that would equal a 1% company contribution.
Employee C – work 100% prevailing wage. They would have a DB contribution of approximately 25% of their total wage. The 401(k) would be 0% since there was no salary deferral.
Employee D – is an owner. This owner deferred 15% of income into the 401(k). The 401(k) contribution would be 3%.
The administrative costs of the Davis-Bacon Plan & Trust and 401(k) Retirement plan are as follows:
There are no employee annual fees associated with the Davis-Bacon Plan & Trust. The internal asset charge is 1.35% which is charged on the internal rate of return of the investment options. Each employee is eligible the first hour worked and has an individual account with 53 investment option to choose from. There is no employer annual fee and the participant fee is only $15 beginning April 2006. Terminated employees are handled by our office and Davis-Bacon Pension Administrators. There are no check cutting or 5500 filing fees.
I hope this summary gives you the information that you are looking for. I will touch base with you shortly to answer any remaining questions that you may have.
We recognize the problems open shop construction firms have trying to bid against the union shops on public projects. In 1988, we established Davis-Bacon Pension Administrators, Inc. for the sole purpose of helping open shop contractors take advantage of Prevailing Wage Contract Laws and be more competitive.
Here’s how it works. The Davis-Bacon Pension Trust allows non-union employers, like you, to place up to 100% or the Prevailing Wage Fringe Benefit Rate into the Trust – excluding the entire fringe from gross payroll.
