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amendment to pick-up provisions in governmental plan


Guest PatriciaT
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Guest PatriciaT

governmental money purchase plan is thinking of amending, so that the 2% pick-up contribution now (mandatory for participation) will be changed to allow a range from which to elect (one-time, irrev). Question: Can existing participants change their pick-up amount on account of the amendment, or are they still subject to the prior election? if existing participants cannot change, then are only new participants able to take advantage of the amended pick-up terms? Tx.

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Under Rev. Rul. 2006-43, a pick-up arrangement must "not permit a participating employee from and after the date of the 'pick-up' to have a cash or deferred election right (within the meaning of § 1.401(k)-1(a)(3)) with respect to designated employee contributions." Treas. Reg. 1.401(k)-1(a)(3)(v) excludes from the definition of cash or deferred election:

a one-time irrevocable election made no later than the employee's first becoming eligible under the plan or any other plan or arrangement of the employer that is described in section 219(g)(5)(A) (whether or not such other plan or arrangement has terminated), to have contributions equal to a specified amount or percentage of the employee's compensation (including no amount of compensation) made by the employer on the employee's behalf to the plan and a specified amount or percentage of the employee's compensation (including no amount of compensation) divided among all other plans or arrangements of the employer (including plans or arrangements not yet established) for the duration of the employee's employment with the employer, or in the case of a defined benefit plan to receive accruals or other benefits (including no benefits) under such plans.

Thus, although new employees can have a one-time election as to the level of contributions, existing employees are still subject to the prior election.

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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