Favorable letters do not address contributions made to the plan as employer’s “pick-up contributions” and qualified governmental excess benefit arrangements. Sponsors may, however, apply for a private letter ruling from the IRS for these matters.  

To qualify as pick-up contributions:

• The employer must make the contributions but designate them as employee contributions—Internal Revenue Code (IRC) Section 414(h)(2); and
• The employees must not have the option to receive the contributions directly instead of having their employer pay these to the plan—Revenue Rulings 81-35 and 81-36. 

For a governmental plan to have a valid pick-up contributions arrangement, the employer’s duly authorized person must state in writing that:

• The employer will make the contributions to the plan but designate them as employee contributions—IRC Section 414(h)(2); and 
• The employees must not have the option to receive the contributions directly in cash or by an election to defer them either before or after the date the employer pays them to the plan—Revenue Ruling 2006-43. 

The plan benefits under a qualified governmental excess benefit arrangement are not considered in determining whether it meets the general annual IRC Section 415 limits—IRC Section 415(m)(3).  

For a governmental plan to have a qualified governmental excess benefit arrangement, it must: 

• Maintain a portion of the plan to solely provide participants with annual plan benefits that exceed IRC Section 415 limits, 
• Not provide the participants an election to directly or indirectly defer compensation to this portion of the plan; and 
• Pay these benefits from a trust solely maintained to pay these benefits—IRC Section 415(m)(3).