Slow-down for pick-ups

[Guest Kathleen Meagher]

I've recently learned from a reliable source that the Service is backtracking somewhat on previous liberal rulings on employee elections to participate in pick-up arrangements.

The Service is now taking the position that a mandatory employee contribution that is picked up by the employer will not be valid under section 414(h)(2) if employees have a continuing right to elect participation in the plan receiving the pick-ups. Previous PLRs had approved pick-ups under plans that offered employees an election to participate as long as the election to participate was irrevocable. However, these rulings permitted employees who didn't at first elect to participate to make that election in future years.

Now it appears that failure to elect participation will be treated as an irrevocable election not to participate, although an employer may give employees 24 months to make a decision.

Perhaps this isn't news to others, but I was taken aback. Anyone else have experience with this issue?