KRS 65.155: Pick up of employee contributions.

(1) Each local government or local government agency which has a pension plan which

is qualified under Section 401(a) of the Internal Revenue Code shall, solely for the

purpose of compliance with Section 414(h) of the United States Internal Revenue

Code, pick up the employee contributions made to the respective retirement system

pursuant to KRS 79.080, 90.400, 90.410, 95.290, 95.580, 95.627, 95.768, 95.769,

95.867, or 96.180 for all compensation earned after August 1, 1982, or after

qualification pursuant to Section 401(a) of the Internal Revenue Code, whichever is

later, and all contributions so picked up shall be treated as employer contributions in

determining tax treatment under the United States Internal Revenue Code and KRS

141.010. However, each local gov ernment or local government agency shall

continue to withhold federal and state income taxes based upon these contributions

and hold them in a separate account until the Internal Revenue Service or the

federal courts rule that, pursuant to Section 414(h) o f the United States Internal

Revenue Code, these contributions shall not be included as gross income of the

employee until such time as the contributions are distributed or made available to

the employee. The picked -up employee contribution shall satisfy a ll obligations to

the retirement fund satisfied prior to August 1, 1982, or later date, as the case may

be, by the employee contribution, and the picked -up employee contribution shall be

in lieu of an employee contribution. The local governments or local g overnment

agencies shall pay these picked-up employee contributions from the same source of

funds which is used to pay earnings to the employee. The employee shall have no

option to receive the contributed amounts directly instead of having them paid by

the local government or local government agency to the fund. Employee

contributions picked up after August 1, 1982, shall be treated for all purposes of

KRS 79.080, 90.400, 90.410, 95.290, 95.580, 95.627, 95.768, 95.769, 95.867, or

96.180 in the same manner and to the same extent as employee contributions made

prior to August 1, 1982, or later date of pick up, as the case may be.

(2) The pick up of employee contributions by the employer shall not be construed to

reduce the final salary or the average salary u pon which the employee retirement

benefit may be based in any of the retirement systems covered by this section.