TT asks if I am "covered by a retirement plan at work". What precisely is meant by "covered ..."?

[rifi]

I am self employed. I have a SEP IRA that I last contributed to years ago. Does this mean I am currently "covered by a retirement plan at work"? TT is prompting me to contribute to a traditional IRA.

[DavidD66]

No, it's not referring to a SEP IRA you contributed to years ago.  It's referring to a retirement plan (401(k), 403(b), pension plan, etc.) offered by an employer you worked for during 2019.

[rifi]

Thank you for your response.

I asked because TT gave examples of “a retirement plan at work”, including “ 401k,403b, Keogh, SEP, SIMPLE, qualified pension plans , and some other situations” where “ ... you’re also considered covered”.

Thus, could you please confirm that a SEP IRA previously contributed to by a self employed person does not now make that same person considered to be “ covered by a retirement plan at work”.

[DaveF1006 · Accepted solution]

Please view this irs link. in this link it states:

You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

• Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;
   
• IRA-based plan (SEP, SAR SEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or
   
• Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.

[rifi]

I worked for myself in 2019. A SEP IRA was established for myself a few years ago. No contribution to my SEP IRA for 2019. Why am I not considered "covered at work" for 2019  - is it simply because I will not be contributing to my SEP IRA for 2019?  

[rifi]

Thank you DavidF (and the other David, too). I did not see the last response before I posted my followup questions above. I  do see now that as no contribution made to SEP IRA for 2019, I am thus not considered covered. 

[DaveF1006]

If the only retirement plan you have is the SEP-IRA and if you made no contribution to it then you are not covered by a retirement plan at work. 

[rifi]

DaveF:

To be clear, I did make contributions to my SEP IRA for some prior years. I did not make one  for tax year 2019.

You indicated I am not considered covered (for 2019) if I did not contribute to my SEP IRA. Are you referring a contribution at any time, or a contribution for tax year 2019? "Not considerd covered" for tax year 2019 if no contribution to SEP IRA for tax year 2019 (or if no contribution to SEP IRA at any time)?

[KarenM90 · Accepted solution]

Here are the IRS regulations for the definition of Covered by a Retirement Plan:

You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

• Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;
   
• IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or
   
• Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.

Here is a link to the IRS above article:  IRS Article on Covered by Employer's Retirement Plan.

[jimrice57]

What if you work at two places and one had a plan and one did not?

[DawnC]

You are covered by a retirement plan at work if you were eligible to participate.   If you were eligible to participate for the plan year ending with or within the tax year, you are considered covered by a plan at work.  

Box 13 on the Form W-2 you receive from your employer should contain a check in the “Retirement plan” box if you are covered. If you are still not certain, check with your (or your spouse’s) employer.

The limits on the amount you can deduct don’t affect the amount you can contribute. However, you can never deduct more than you actually contribute.    @jimri

[jimrice57]

Just so I am clear on you explanation , if I worked at ANY company during the year that checked the box then I am covered by a retirement plan.  

[VolvoGirl]

Yes.

[DawnC]

Yes, if you were eligible to participate in any one employer plan, you are considered covered by a retirement plan at work.    @jimrice57

[stillalmel]

Hello - I have a question about this topic this year (2021), although I have a different situation. Background: I worked in 2021, but my husband did NOT. We both made IRA contributions since I made enough at work to cover them both.

I am unsure how to answer the question on TurboTax that asks if my husband was covered by a retirement plan at work.

He did not work, so I feel like the answer should be he was NOT covered by a retirement plan at work. However, I am not sure since he was only allowed to make an IRA contribution because I worked and therefore maybe since I was covered by a retirement plan at work, he is also considered covered by my retirement plan. 

Additionally, I don't think this has any bearing on the situation, but want to make sure. My husband is a military retiree who gets a military retirement, but since he no longer works (for past 2.5 years) he isn't currently covered by a retirement plan at work.