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Employers Manual
Employer Pickup
Pickup as a Fringe Benefit/Extra Compensation
Contributions picked up by an employer in addition to stated
salary may or may not be included in compensation subject to retirement
contributions. When the employer action specifies that employer pickup,
in addition to stated salary, is to be included in compensation for
retirement purposes, total compensation should be determined by adding
the amount of retirement contributions to be picked up to stated salary.
Member and employer contributions must then be remitted on this total
compensation.
The authorizing action by the employer must expressly state that the employer pickup is to be included in earned compensation for retirement contribution purposes. Otherwise, STRS Ohio will assume that the pickup is not to be included in earnings for retirement purposes.
Here’s an example of pickup not included in compensation for retirement purposes:
Assume that a teacher is employed on a full-time contract for $30,000 and that the employer has a “fringe benefit” pickup plan in effect, and the employer does not include the pickup in compensation for retirement purposes.
| Contract salary | $30,000 |
| Employee retirement contribution (10% of salary paid by employer in addition to stated salary) | $3,000 |
| Taxable income (federal and state) | $30,000 |
| Earnings for retirement purposes ($3,000/10%= $30,000) | $30,000 |
Here’s an example of a pickup included in total compensation for retirement purposes:
Assume that a teacher is employed on a full-time contract for $30,000 and that the employer has a “fringe benefit” pickup plan under which the employer does include the pickup in compensation for retirement purposes.
| Contract salary | $30,000 |
| Employee retirement contribution (10% of salary paid by employer in addition to stated salary) | $3,000 |
| 10% of $3,000 pickup | $300 |
| Total employee contributions | $3,300 |
| Taxable income (federal and state) | $30,000 |
| Earnings for retirement purposes ($3,300 ÷ 10% = $33,000) | $33,000 |
| Employer contributions ($33,000 x 14% = $4,620) | $4,620 |
Here’s an example of a partial pickup included in total compensation for retirement purposes:
Assume that a teacher is employed on a full-time contract for $30,000 and that the employer has a 5% “fringe benefit” pickup plan under which the employer does include the pickup in compensation for retirement purposes. The remaining 5% is salary reduction pickup.
| Contract salary | $30,000 |
| Employee retirement contribution (5% of salary paid by employee) | $1,500 |
| Employee retirement contribution (5% of salary paid by employer in addition to stated salary) | $1,500 |
| 10% of $1,500 pickup | $150 |
| Total employee contributions | $3,150 |
| Taxable income (federal and state) | $28,500 |
| Earnings for retirement purposes ($3,150 ÷ 10% = $31,500) | $31,500 |
| Employer contributions ($31,500 x 14% = $4,410) | $4,410 |
