A 401(k) plan with prevailing wage provisions exists (primarily) as a means to reduce labor related burden, not because of an overwhelming desire to deposit large sums of money into an employee’s retirement account.
Whether Service Contract (SCA), Davis Bacon (DBA), or state prevailing wage, the decision to deposit required fringe monies into a 401(k) plan belongs to the employer, not the employee. This reality must be taken into consideration during 401(k) Plan Design.
Contributions to a properly designed 401(k) plan with prevailing wage provisions can be used to deposit any or all of the required fringes on a PW project. They may also be used to offset other Retirement Plan contributions. Because these are defined as Company contributions, not as employee deferrals, there is no additional wage related burden. It is important to have a third party well versed on prevailing wage requirements to assist in the retirement plan’s implementation.
A properly designed 401(k) plan with prevailing wage provisions saves a Contractor money and should be part of a well designed employee fringe benefit program.