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Question 43 — Special Pay Contributions

Q. If a government employee separates from service, it appears that he or she could fall under the Code Section 401(a) special pay provision, but that he or she would need a recurring contribution such as a mandatory pickup. Is that correct?  

A. Yes. The 401(a) plan must have regular pension contributions in order to receive the "special pay" contributions. The IRS sent a letter to all 401(a) volume submitters in 2004 informing them they would have to add the recurring contributions; otherwise would need to terminate the 401(a) special pay plan. I have seen nothing since that would dispute this position.