What are Prevailing Wage Pension Plans?

What are Prevailing Wage Pension Plans?

What are Prevailing Wage Pension Plans?

Prevailing wage laws were put into place during the Great Depression. The purpose was to prevent unfair practices when it came to labor in non-union situations. Because of this, we have prevailing wage pension plans available.

Understanding the Prevailing Wage

Various laws surround this particular topic. This includes federal prevailing wage laws, state prevailing wage pension plans laws, and prevailing wage laws related to certain localities.

The Davis-Bacon Act

The Davis-Bacon Act is a federal prevailing wage law. This law applies to contractors who perform work on federal contracts. Any contractors that work on federal projects must be paid the prevailing wage for the project.

Although similar to a minimum wage, prevailing wage compensation is different. It is divided into two parts:

  1. Prevailing wage
  2. Prevailing wage fringe

Payment Options

In this case, the contractor can choose to satisfy the required Davis-Bacon obligation more than one way. These options include:

  • Paying wage and fringe portions in cash
  • Paying wage in cash and the fringe through a contribution to a benefit plan (such as a retirement fund)
  • Combination of both methods


To satisfy the prevailing wage fringe, most companies may choose to contribute to a retirement or profit-sharing plan. This is different from paying out in cash. If the fringe is paid in cash as compensation, the payment is subject to FICA and other payroll taxes. If the fringe is contributed to a benefit plan, it is not taxed.

Is it Right for You?

The prevailing wage fringe payment is also beneficial to the employer. The fringe payment can be used to avoid the required minimum contribution. Although there is no such thing as a “Davis Bacon Plan,” there are plans that work with the law. Overall, these prevailing wage pension plans have many benefits, and it would be good to look into whether or not it is right for you.

To learn more about prevailing wage pension plans, get in touch with us at Davis-Bacon Pension Plans, Inc. by calling (425) 889-8855 or filling out our convenient online contact form. We can discuss the advantages of discharging required prevailing wage fringe payments through a Davis Bacon pension plan.