Types of Pickup
There are three types of employer pickup:
- Salary reduction pickup;
- Fringe benefit pickup not included in compensation; and
- Fringe benefit pickup included in compensation (pickup-on-pickup).
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Salary Reduction Pickup
For salary reduction pickup, individual members’ salaries are reduced by the amount of member retirement contributions. The employer then pays the contributions. This type of pickup does not require any additional cash to be paid by the employer. The member receives the benefit of reduced gross income for state and federal tax purposes. For example:
Contract salary and earnings for STRS Ohio purposes $40,000 Member contributions (currently 14%) - 5,600 Taxable federal and state income $34,400 -
Fringe Benefit Pickup Not Included in Compensation
As a way to further compensate employees without increasing their gross income, some employers may choose to pay all or a portion of the member contributions. For fringe benefit pickup not included in compensation, the employer pays all or part of the member contributions without salary reduction. This keeps the member’s gross salary at the same amount. For example:
Contract salary and earnings for STRS Ohio purposes $40,000 Member contributions paid by employer (currently 14%) 5,600 Taxable federal and state income $40,000 -
Fringe Benefit Pickup Included in Compensation (Pickup-on-Pickup)
Similar to the pickup explained in number two above, fringe benefit pickup included in compensation not only allows the employer to pay all or part of the member contributions, but also include these amounts in the member’s salary for STRS Ohio retirement purposes. This is commonly known as pickup-on-pickup. For example:
Contract salary and taxable federal and state income $40,000 Member contributions paid by employer (currently 14%) + 5,600 Compensation for STRS Ohio purposes $45,600 Total contributions due to STRS Ohio equals ($45,600 x 14%) $6,384 A pickup-on-pickup calculator is available to help you determine contributions due to STRS Ohio.