Understanding Employer Pickup Presentation Slides · Employer contribution due (14%) $ 9,800 $...
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[email protected] 1 STATE TEACHERS RETIREMENT SYSTEM OF OHIO Understanding Employer Pickup On-Demand Version Understanding Employer Pickup 50-338c, 1/19/E Review five key items 1. Define employer pickup 2. Explain the types of pickup 3. Discuss the possible member groups 4. Review proper calculation of pickup for member contributions due to STRS Ohio 5. Specify the requirements for adopting or modifying a pickup plan Today’s agenda
Transcript of Understanding Employer Pickup Presentation Slides · Employer contribution due (14%) $ 9,800 $...
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Understanding EmployerPickup
50-338c, 1/19/E
Review five key items
1. Define employer pickup
2. Explain the types of pickup
3. Discuss the possible member groups
4. Review proper calculation of pickup for member contributions due to STRS Ohio
5. Specify the requirements for adopting or modifying a pickup plan
Today’s agenda
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Pickup is the term used to describe the process of withholding member contributions on a pretax basis.
What is pickup?
The following conditions apply:• The employer must specify that contributions, although designated as
member contributions, are being paid by the employer in lieu of the member;
• The member must not be given the option of choosing to receive the amounts directly instead of having them paid by the employer to STRS Ohio; and
• Pickup plans cannot be retroactive.
Rules for pickup
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
1. Salary reduction pickup
2. Fringe benefit pickup not included in compensation
3. Fringe benefit pickup included in compensation (pickup-on-pickup)
Three types of pickup
Three recognized employee groups
K–12
Employers
College and
University Employers
Teachers Teaching Faculty
Administrators Administrative Faculty
Superintendents Presidents
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
No, the type and percentage of pickup can vary within a group as long as the total percentage of all pickup plans is the same for each member within that group.
Do all members of a group have to have the same type of pickup plan?
Comparing types of pickup
Salary Reduction
Pickup
Fringe Benefit Pickup NotIncluded in Compensation
Fringe Benefit Pickup Included in
Compensation (Pickup-on-Pickup)
How does it work? Member’s salary
reduced by the
amount of member
contributions and
employer remits
pretax
Employer agrees to pay
member’s pretax
contributions
Employer agrees to pay
member’s pretax contributions
AND considers the payment as
compensation for retirement
purposes
Who funds member
contributions?Member
Employer funds all or
a portion
Employer funds all or
a portion
Benefit to member? Reduced gross
income for state and
federal tax purposes
Further compensates
employee without
reducing gross income
for tax purposes
Further compensates employee
without reducing gross income
for tax purposes AND increases
income for retirement purposes
Groups?* Teachers Administrators Superintendents/Presidents/
Administrators
*While any group or individual can have any type of pickup plan, generally districts tend to grant these types of pickup to the identified groups of employees.
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Comparing types of pickup
Salary Reduction
Pickup
Fringe Benefit Pickup NotIncluded in Compensation
Fringe Benefit Pickup Included in
Compensation (Pickup-on-Pickup)
How does it work? Member’s salary
reduced by the
amount of member
contributions and
employer remits
pretax
Employer agrees to pay
member’s pretax
contributions
Employer agrees to pay
member’s pretax contributions
AND considers the payment as
compensation for retirement
purposes
Who funds member
contributions?Member
Employer funds all or
a portion
Employer funds all or
a portion
Benefit to member? Reduced gross
income for state and
federal tax purposes
Further compensates
employee without
reducing gross income
for tax purposes
Further compensates employee
without reducing gross income
for tax purposes AND increases
income for retirement purposes
Groups?* Teachers Administrators Superintendents/Presidents/
Administrators
*While any group or individual can have any type of pickup plan, generally districts tend to grant these types of pickup to the identified groups of employees.
Comparing types of pickup
Salary Reduction
Pickup
Fringe Benefit Pickup NotIncluded in Compensation
Fringe Benefit Pickup Included in
Compensation (Pickup-on-Pickup)
How does it work? Member’s salary
reduced by the
amount of member
contributions and
employer remits
pretax
Employer agrees to pay
member’s pretax
contributions
Employer agrees to pay
member’s pretax contributions
AND considers the payment as
compensation for retirement
purposes
Who funds member
contributions?Member
Employer funds all or
a portion
Employer funds all or
a portion
Benefit to member? Reduced gross
income for state and
federal tax purposes
Further compensates
employee without
reducing gross income
for tax purposes
Further compensates employee
without reducing gross income
for tax purposes AND increases
income for retirement purposes
Groups?* Teachers Administrators Superintendents/Presidents/
Administrators
*While any group or individual can have any type of pickup plan, generally districts tend to grant these types of pickup to the identified groups of employees.
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
If you can’t find the information, please send an email to [email protected]. We can provide current and historical information.
How do I determine which pickup plan(s) my district or university has adopted?
Fringe benefit pickup plans, regardless of whether the pickup is included in compensation for retirement purposes, provide a way of further compensating particular employees or groups of employees.
Why would a district grant a fringe benefit pickup plan to an employee?
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Comparing pickup types by the dollar
Salary
Reduction
Pickup
Fringe Benefit Pickup
Not Included in
Compensation
Fringe Benefit
Pickup Included in
Compensation
(Pickup-on-Pickup)
Base contract amount $50,000 $50,000 $50,000.
Member contribution due ($50,000 x 14%) $7,000 $7,000$7,000.
+ (14% of $7,000)
Taxable state & federal income $43,000 $50,000 $50,000.
Compensation for STRS Ohio purposes $50,000 $50,000 $57,000.
Comparing pickup types by the dollar
Salary
Reduction
Pickup
Fringe Benefit Pickup
Not Included in
Compensation
Fringe Benefit
Pickup Included in
Compensation
(Pickup-on-Pickup)
Base contract amount $50,000 $50,000 $50,000.
Member contribution due ($50,000 x 14%) $7,000 $7,000$7,000.
+ (14% of $7,000)
Taxable state & federal income $43,000 $50,000 $50,000.
Compensation for STRS Ohio purposes $50,000 $50,000 $57,000.
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Comparing pickup types by the dollar
Salary
Reduction
Pickup
Fringe Benefit Pickup
Not Included in
Compensation
Fringe Benefit
Pickup Included in
Compensation
(Pickup-on-Pickup)
Base contract amount $50,000 $50,000 $50,000.
Member contribution due ($50,000 x 14%) $7,000 $7,000$7,000.
+ (14% of $7,000)
Taxable state & federal income $43,000 $50,000 $50,000.
Compensation for STRS Ohio purposes $50,000 $50,000 $57,000.
• Full 14% pickup-on-pickup
• Member contributions (14%) calculated as follows:
Properly calculating pickup-on-pickup
Base contract amount (taxable state & federal income) $70,000
Member contributions paid by employer (14%) +$9,800
Earnings for STRS Ohio purposes $79,800
Total member contributions due to STRS Ohio
($79,800 x 14% paid by employer)$11,172
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
• Full 14% pickup-on-pickup
• Employer contributions (14%) calculated as follows:
Properly calculating pickup-on-pickup
Earnings for STRS Ohio purposes $79,800
Total employer contributions due to STRS Ohio ($79,800 x 14%) $11,172
Comparing a pickup example by the dollar
Salary
Reduction
Pickup
Fringe Benefit
Pickup Not Included
in Compensation
Fringe Benefit
Pickup Included in
Compensation
(Pickup-on-Pickup)
Base contract amount $70,000 $70,000 $70,000
Compensation for STRS Ohio purposes $70,000 $70,000 $79,800
Member contribution due (14%) $9,800 $9,800 $11,172
Employer contribution due (14%) $9,800 $9,800 $11,172
Total contributions due from employer $9,800 $19,600 $22,344
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Comparing a pickup example by the dollar
Salary
Reduction
Pickup
Fringe Benefit
Pickup Not Included
in Compensation
Fringe Benefit
Pickup Included in
Compensation
(Pickup-on-Pickup)
Base contract amount $70,000 $70,000 $70,000
Compensation for STRS Ohio purposes $70,000 $70,000 $79,800
Member contribution due (14%) $9,800 $9,800 $11,172
Employer contribution due (14%) $9,800 $9,800 $11,172
Total contributions due from employer $9,800 $19,600 $22,344
Comparing a pickup example by the dollar
Salary
Reduction
Pickup
Fringe Benefit
Pickup Not Included
in Compensation
Fringe Benefit
Pickup Included in
Compensation
(Pickup-on-Pickup)
Base contract amount $70,000 $70,000 $70,000
Compensation for STRS Ohio purposes $70,000 $70,000 $79,800
Member contribution due (14%) $9,800 $9,800 $11,172
Employer contribution due (14%) $9,800 + $9,800 $11,172
Total contributions due from employer $9,800 $19,600 $22,344
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Comparing a pickup example by the dollar
Salary
Reduction
Pickup
Fringe Benefit
Pickup Not Included
in Compensation
Fringe Benefit
Pickup Included in
Compensation
(Pickup-on-Pickup)
Base contract amount $70,000 $70,000 $70,000
Compensation for STRS Ohio purposes $70,000 $70,000 $79,800
Member contribution due (14%) $ 9,800 $ 9,800 $11,172
Employer contribution due (14%) $ 9,800 $ 9,800 +$11,172
Total contributions due from employer $ 9,800 $19,600 $22,344
• “Split” plan example: 10% pickup-on-pickup, 4% salary reduction pickup
• Member contributions (14%) calculated as follows:
Properly calculating pickup-on-pickup
Base contract amount (taxable state & federal income) $70,000
Member contributions paid by employer (10%) +$7,000
Earnings for STRS Ohio purposes $77,000
Total member contributions due to STRS Ohio
($77,000 x 14%)$10,780
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
• “Split” plan example: 10% pickup-on-pickup, 4% salary reduction pickup
• Member contributions — Who pays what?
Properly calculating pickup-on-pickup
MEMBER CONTRIBUTIONS DUE FROM MEMBER (4%)
Base contract amount $70,000
x 4% salary reduction pickup x .04
Member contributions due from member $2,800
• “Split” plan example: 10% pickup-on-pickup, 4% salary reduction pickup
• Member contributions — Who pays what?
Grand total of member contributions due is:
$7,980 (employer paid) + $2,800 (member paid) = $10,780 (as expected)
Properly calculating pickup-on-pickup
MEMBER CONTRIBUTIONS DUE FROM EMPLOYER (10%)
Base contract amount $70,000
x 10% member contribution paid by employer x .10
$7,000
+ 14% of the 10% pickup-on-pickup (14% x $7,000) + 980
Total member contributions due from employer $7,980
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
• “Split” plan example: 10% pickup-on-pickup, 4% salary reduction pickup
• Employer contributions (14%) calculated as follows:
Earnings for STRS Ohio purposes $77,000
Total employer contributions due to STRS Ohio ($77,000 x 14%) $10,780
Properly calculating pickup-on-pickup
Step 1: Complete and submit Notification for Employer Pickup of Employee Contributions form to STRS Ohio. This form can be found on our employer website.
What do I need to do if our board adopts or modifies our pickup plan(s)?
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Completing the Notification for Employer Pickup of Employee Contributions form
Completing the Notification for Employer Pickup of Employee Contributions form
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STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Completing the Notification for Employer Pickup of Employee Contributions form
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Step 2: Provide a certified copy of the school board resolution or action with your Notification for Employer Pickup of Employee Contributions form.
What do I need to do if our board adopts or modifies our pickup plan(s)?
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Sample Board Resolution Adopting or Modifying a Pickup Plan
Visit www.strsoh.org/employer for multiple resources:
Does STRS Ohio have tools available to assist me with pickup questions?
STATE TEACHERS RETIREMENT SYSTEM OF OHIO
Understanding Employer Pickup
On-Demand Version
Visit www.strsoh.org/employer for resources:
• Employer Pickup fact sheet
• Employer Pickup section
Does STRS Ohio have tools available to assist me with pickup questions?
• Questions?– Phone toll-free: 888-535-4050
– Email: [email protected]
• We hope you found this helpful!
Thank you!
