Government Pick-Ups

[LIBOR]

I'm currently involved with a municipal DB plan that calls for mandatory ee contributions.

With limited understanding of 414(h)(2) my impression is that the plan can be amended to replace or augment the mandatories with a "pick-up" arrangement.

We're currently funding the plan under the Projected Unit Credit method and the annual suggested Town contribution is comprised of net service cost ( i.e total service cost net of mandatories) plus an amortization of the unfunded.

Since the "pick-ups" are employer contributions, they would just go towards the suggested Town contribution described above, correct ??

And lastly, if the "pick-up" arrangement augments the current mandatory arrangement & if the mandatories are a % of base pay, then base pay would include the "pick-up" amounts, correct ??

[david rigby]

No expert I (that never stopped me from having an opinion).

(1) I would show the total cost of the plan, show the expected amount of EE contributions, and the net.

(2) Base pay should be defined in the document. If the plan is amended to add the 414(h) feature, then such amendment should specify whether these EE contributions are included in the definition of comp.