What Is "414(h)" on My W-2 Forms?

The 414(h) line on a W-2 form indicates Employer "Pick Up" Contributions. Section 414(h)(2) of the tax code allows government agencies offering 401(a) retirement plans to designate certain contributions as employee contributions, even though the contribution is paid by the employing government entity.

The 414(h) line indicates income that is not taxable, since it is classified as an employee contribution. This makes Employer "Pick Up" Contributions a benefit for employees because it provides a form of compensation that is not taxed. 414(h) contributions are sometimes confused with salary reduction agreements, an option that allows for employees to elect to reduce cash compensation.