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Employer pick-up contributions on salary continuance amounts?


Guest erisaregs
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Guest erisaregs

The Employer participates in a state retirement plan, which is a governmental plan under Code Section 414(d) (the "Plan"). The Plan has Participant mandatory contributions equal to 5% of Compensation. "Compensation" is defined under the Plan to include salary continuance amounts funded by an employer whose emplyees participate in the Plan.

The employer has elected to designate employee contributions as employer contributions under the pick-up provisions of Code Section 414(h)(2).

A Participant in the Plan is absent from work and receives salary continuance amounts from an employer-sponsored insured plan, the premiums of which are paid solely by the Employer. All salary continuance amounts, net of F.I.C.A. withholding, are sent directly from the insurance company to the Participant. Historically, the Participant has sent 5% of the gross salary continuance amounts to the Employer for the Employer's remittance to the Plan.

Questions:

1. Assuming that the Participant and insurance company are both willing to do so, may the contributions of 5% of the salary continuance amounts be withheld by the insurance company and remitted to the Employer? May they be withheld and remitted directly to the Plan or trustee of the Plan?

2. Is there any type of arrangement which may be set up so that the 5% contributions on salary continuance amounts may be designated as employer contributions under Section 414(h)(2) or must they be designated as participant after-tax contributions?

Thanks in advance for your input.

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