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Covered by an Employer's Retirement Plan or not?

For IRA decision (for the year 2017), Am I considered (Covered by an Employer's Retirement Plan) even when I will not contribute anything during 2017 to my available 401K plan?

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Level 15
Level 15

Covered by an Employer's Retirement Plan or not?

If no contributions are made to your 401(k) by either you or your employer for the entire year, then you are not considered an active participant for that year, and it will not affect your ability to make a deductible IRA contribution. If you participated in the 401(k) plan for 2016, make sure that your employer will not be making a 2016 matching contribution in 2017.

Many employers do not understand this rule. Check with your payroll department and make sure that the "Retirement plan" box on your W-2 will not be checked. If they disagree, refer them to IRS Notice 87-16. Make sure they understand that a 401(k) is a defined contribution plan, not a defined benefit plan.

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Highlighted
Level 15
Level 15

Covered by an Employer's Retirement Plan or not?

If no contributions are made to your 401(k) by either you or your employer for the entire year, then you are not considered an active participant for that year, and it will not affect your ability to make a deductible IRA contribution. If you participated in the 401(k) plan for 2016, make sure that your employer will not be making a 2016 matching contribution in 2017.

Many employers do not understand this rule. Check with your payroll department and make sure that the "Retirement plan" box on your W-2 will not be checked. If they disagree, refer them to IRS Notice 87-16. Make sure they understand that a 401(k) is a defined contribution plan, not a defined benefit plan.

View solution in original post

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