Section 40 ILCS 5/7-173.2 - Pickup of employee contributions(a) Until July 1, 1984, each participating municipality and each participating instrumentality may elect, for all of its employees, to pick up the employee contributions required by subparagraphs 1 and 3 of subsection (a) of Section 7-173 and, in the case of sheriff's law enforcement employees, required by Section 7-173.1. The pick up may be for employee contributions on earnings received by employees after December 31, 1981 and shall be applicable to the contributions on total earnings paid in any month. The decision to pick up contributions shall be made by the governing body. Beginning July 1, 1984, the pick up of employee contributions shall cease to be optional. Each participating municipality and participating instrumentality shall pick up the employee contributions required by subparagraphs 1 and 3 of subsection (a) of Section 7-173 and, in the case of sheriff's law enforcement employees, contributions required by Section 7-173.1, for all compensation earned after such date.
(b) Contributions that are picked up shall be treated as employer contributions in determining tax treatment under the United States Internal Revenue Code. The employee contribution shall be paid from the same source of funds as is used in payment of earnings to the employee and may not be paid from funds raised by the tax levy authorized by Section 7-171. The contributions shall be picked up by a reduction in earnings payment to employees. Employee contributions that are picked up shall be considered as earnings under Section 7-114. If a participating municipality or participating instrumentality fails to report participating employee earnings which should have been reported to the fund and pays the employee the full amount of earnings including employee contributions which should have been picked up and forwarded to the fund, then the employee shall make payment of the employee contributions to the fund on behalf of employer and such contributions shall be considered as picked up contributions if paid in the year the earnings were received, or by January 31st of the following year, and are reflected as picked up on reports to the Internal Revenue Service. If they cannot be so reflected, or if received after that date, they shall not be treated as picked up contributions. Picked up employee contributions shall be considered as employee contributions in computing benefits paid under this Article 7.(c) Subject to the requirements of federal law, an employee may elect to have the employer pick up optional contributions that the employee has elected to pay to the Fund, and the contributions so picked up shall be treated as employer contributions for the purposes of determining federal tax treatment. The employer shall pick up the contributions by a reduction in the cash salary of the employee and shall pay the contributions from the same source of funds that is used to pay earnings to the employee. The employee's election to have the optional contributions picked up is irrevocable and the optional contributions may not thereafter be prepaid, by direct payment or otherwise. P.A. 90-766, eff. 8/14/1998.