A municipality may pick up the police officers’ contributions required by Section 3-125.1 for all salary earned after December 31, 1981. If a municipality decides not to pick up the contributions, the required contributions shall continue to be deducted from salary. If contributions are picked up, they shall be treated as employer contributions in determining tax treatment under the United States Internal Revenue Code. However, the municipality shall continue to withhold Federal and State income taxes based upon these contributions until the Internal Revenue Service or the Federal courts rule that pursuant to Section 414(h) of the United States Internal Revenue Code these contributions shall not be included as gross income of the police officers until such time as they are distributed or made available. The municipality shall pay these contributions from the same source of funds which is used to pay the salaries of police officers. The municipality may pick up these contributions by a reduction in the cash salary of the police officer or by an offset against a future salary increase or by a combination of a reduction in salary and offset against a future salary increase. If contributions are picked up they shall be considered for all purposes of this Article as police officers’ contributions made prior to the time that contributions were picked up.