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Pick-ups for specific classes of employees


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One of the requirements for a pick-up arrangement is that the "employer  must  specify in writing (e.g., minutes of meeting, a resolution, or an ordinance) that “contributions on behalf of a specific class of [its] employees . . .  although designated as employee contribution , will be paid by the employer  in lieu of employee contributions.”

 Is there any guidance on what constitutes a "specific class of employees"? It appears that the employer need not cover all employees, just a "specific class." Is anyone aware of any guidance on this point?  For example, it would appear that the employer could commence pick-ups after two years of service and have different rates of pick-up for different classes of employees covered by the plan.

Can the employer prospectively change the amount of the pick-ups, provided the employee doesn't have a cash or a deferred election right? 

 

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There are really only two restrictions I have encountered. First, if the employer is legally required to pay a particular amount of wages (by minimum wage laws, employment contract, or collective bargaining agreement), it may not be able to raise mandatory picked up contributions to a level that would result in wages, after reduction for the pickups, being below the required level. 

The second constraint is that the group subject to the pickup cannot be so small as to give rise to an implication that the employees in fact had individual discretion. For example, if the "group" consisted of a single employee, and that employee's contributions went up or down from one year to another, the IRS would likely take the position that the changes were made because the employee asked for them. It is not clear how large the group has to be to avoid this issue, but it is a consideration for very small groups. 

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