True or False: QNECs associated with an employer's obligation under the Davis-Bacon Act are limited to 5% of compensation.

The statement is false because Qualified Non-Elective Contributions (QNECs) associated with an employer's obligation under the Davis-Bacon Act do not have a statutory limit of 5% of compensation. The Davis-Bacon Act requires that contractors and subcontractors pay prevailing wages on federally funded or assisted construction projects, and QNECs can be used to comply with non-discrimination requirements for 401(k) plans.

Circumstances dictate the specific application and amount of QNECs rather than imposing a strict 5% cap on contributions tied to the Davis-Bacon Act. It is crucial to recognize that QNECs are designed to help ensure contributions meet various compliance standards, but the specific percentage can vary based on the plan design and related regulations, rather than being fixed at a percentage of compensation. Therefore, stating that QNECs are limited to 5% is not accurate, confirming that the correct response is indeed false.