The Davis-Bacon Act is a federal prevailing wage law. It is governed by the Department of Labor and is applied to both contractors and subcontractors who perform work on various government projects. There are specifics in terms of this act, as these projects must be in excess of $2,000 for all of the construction, repair, or alteration. As an employer, this affects you because you are required to pay the prevailing wage rate, including fringe benefits. This is where prevailing wage pension plans come into play.
What Qualifies as Fringe Benefits?
Fringe benefits include retirement plans, health insurance, life insurance, any bona fide benefit, as well as vacation, holiday, and sick leave.
How to Satisfy the Requirements
As an employer, you benefit from prevailing wage pension plans, because it allows you to satisfy the Davis-Bacon requirement in alternative ways. These ways include:
- Paying both wage and fringe portions in cash
- Paying the wage portion in cash and the fringe portion by contributing to prevailing wage pension plans
- Combining both cash wages, along with bona fide fringe benefits
Other Advantages to Using a Prevailing Wage Pension Plan
Other advantages might include lowered general liability premiums in addition to lower worker’s compensation premiums. This is because fringe benefits are not considered part of payroll.
These plans are also beneficial to employees because benefits are purchased before taxes. This means that when the prevailing wage plan is combined with a 401(k) plan, employees will be able to pay less in taxes.
Be Sure That You Are in Compliance
Although there are many benefits to prevailing wage contributions to a qualified benefit plan, it is important to be aware of Davis-Bacon requirements. It is essential that these plans are in compliance.