State Teachers Retirement System of Ohio

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Employer Pickup

1. What is employer pickup?

 

Section 414(h)(2) of the Internal Revenue Code authorizes the tax-deferral or pickup of employee contributions to STRS Ohio. These tax-deferred contributions are not subject to federal and state taxes during the current year but are subject to taxation when received as a benefit or plan distribution.

2. Are there different types of pickup?

 

Yes. There are three different types of pickup:

  1. Salary reduction: Under this type of employer pickup, individual members' salaries are reduced by the amount of member retirement contributions. The employer then pays the contributions. This form of pickup does not require any additional cash to be paid by the employer. The member receives the benefit of reduced gross income for state and federal purposes.
  2. Fringe benefit pickup not included in compensation: As a way to further compensate employees without increasing their gross income, some employers may choose to pay all or a portion of the member contributions. Under this type of pickup, members receive the benefit of the employer paying all or part of their member contributions without salary reduction, thus keeping their gross salary at the same amount.
  3. Fringe benefit pickup included in compensation (pickup-on-pickup): Similar to the pickup outlined in number two above, this type of pickup not only allows the employer to pay all or part of the member contributions, but also include those amounts in the member's salary for STRS Ohio retirement purposes.

3. If we already notified STRS Ohio when we initially adopted a pickup plan, do we have to let STRS Ohio know if we make changes to the plan?

 

Yes. In addition to the initial notification to STRS Ohio of the pickup plan adoption, you must notify STRS Ohio whenever a pickup plan has been revised. The procedure for notifying STRS Ohio of a pickup plan modification is the same as the procedure for initial notification. Complete a Notification for Employer Pickup of Employee Contributions form and send it to STRS Ohio along with a certified copy of the applicable board action.

4. Can a school adopt a retroactive pickup plan?

 

No. A pickup plan may not be effective for contributions made prior to the date of the board resolution implementing the pickup plan.

5. Do we have to offer the same type of pickup plan to all of our employees?

 

No. The type and percentage of pickup can vary within a group as long as the total percentage of all pickup plans is the same for each member within that group. For example, if the board adopts a fringe benefit pickup not included in compensation plan for all administrators, it is possible that the employer can pay the full amount of fringe benefit member contributions for a high school principal, and pay only a portion of a junior high principal’s fringe benefit member contributions, such as 5% fringe benefit pickup and the remaining percentage as salary reduction pickup. In a case like this, please provide STRS Ohio with documentation, such as the employee contracts, that clearly indicate the pickup amounts per individual.

6. Does pickup-on-pickup benefit reemployed retirees?

 

The calculation for the monthly annuity for reemployed retirees is not based on the five highest years of earnings, as is the case with service retirement. The reemployed retiree does benefit by receiving an annuity or lump-sum payout from the inflated amount of contributions reported on their account.

7. Can a member pay part of their pickup-on-pickup?

 

No, members cannot pay part of the pickup-on-pickup.

8. Where can I find an example of how to calculate pickup-on-pickup?

 

For basic examples, please see the Employer Pickup fact sheet. For more in depth examples, please see Section 4 of the Employers Manual.

9. Is a calculator available to help me ensure I am sending correct contributions to STRS Ohio for individuals with pickup-on-pickup?

 

Yes. A pickup calculator is available in the Calculators section of the employer website. The calculation will only be as accurate as the information you provide. When entering data, please be sure you have accurately represented the percentage to be included in compensation for retirement purposes.

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