Do you know about Prevailing Wage/Davis Bacon Retirement Plans?

September 2006

 

Prevailing Wage/Davis Bacon plans are defined contribution plans (retirement savings plans). Many government contractors are not fully aware of the intricacies and availability of prevailing wage 401k retirement plans. First, Prevailing Wage/Davis Bacon plans are utilized by non-union contract employers who perform duties for governmental agencies. What is “Prevailing Wage” and “Davis Bacon”? Prevailing wage is used in reference to jobs performed on a local/county/state basis while Davis Bacon refers to jobs performed for the federal government.

Governmental wages are set by the U.S. Department of Labor and contractors must pay the prevailing wage on government projects. This wage is broken into two pieces, the base rate and the fringe rate. The base rate is usually equivalent to compensation for a private job and the fringe rate is the additional compensation for providing services to the local or federal government. In order to allow employers to avoid paying additional expenses (workers compensation, health insurance, payroll taxes) associated with the fringe rate, the government allows for all or part of the fringe rate to be directed into a qualified retirement plan.

The problem for many business owners who provide labor to government agencies is that this additional benefit goes unnoticed many times. In addition, it has been our experience that many businesses are paying considerable fees and commissions to administer their qualified retirement plan. The fact of the matter is that a Davis Bacon plan should and can be cost competitive with other qualified retirement plans.

Davis Bacon plan specialists can help you create a plan to take advantage of these opportunities or review your current plan to see if it is meeting your current needs in a cost efficient manner through a complimentary professional analysis and review of your prevailing wage plan.

Thomas Folino and Kit Mastroberto of Merrill Lynch specialize in Davis Bacon plans and may by reached at 313-954-9270.