Pension/401k Plans for Prevailing Wage
Did you know that being a Prevailing Wage Contractor provides the owners and key employees of the company a special opportunity regarding 401k and Profit Sharing plans?
401k
Not only will the company save money in payroll taxes and workers compensation premiums by getting the fringe dollars off payroll, but converting a portion of those fringe dollars into 401k “elective employee deferrals” for the prevailing wage workers, increases their average elective deferral percentage. This in turn, increases the amount the owners and other Highly Compensated Employees (HCE’s) are allowed to contribute to their own 401k accounts! The result is more personal tax savings today for the owners and HCE’s and every employee will be adding more to their own retirement.
Profit Sharing
With the addition of a Profit Sharing plan, the contributions made to the prevailing wage workers in the 401k scenario above can be counted toward, or offset, against the profit sharing amounts otherwise due to these workers! This means that if the company were to make a profit sharing contribution, more of it can be allocated to the owners and other HCE’s.
If you already have a 401k plan in place, no problem. We can set up a plan specifically for your prevailing wage contributions, and they can be tested together at year-end for compliance. Call us at 760-208-2506 for a confidential analysis.