W2 question

Hello,

 

I always thought that someone that is contributing to a 457b plan would be considered “covered by a retirement plan” for purposes of IRA deductibility. The info below from the W2 seems to say it would NOT make someone covered.

 

Can you confirm?

 

Are the rules different for governmental vs. non-Governmental 457b plans?

 

Form W-2, Box 13

The “Retirement plan” indicator in Box 13 shows whether an employee is an active participant in your company’s plan. If this box is checked, it lets the recipient know that depending on their filing status and modified adjusted gross income, they may not be entitled to a full deduction for their traditional IRA contributions. You should check the retirement plan box if an employee was an “active participant” for any part of the year in:

  • a qualified pension, profit-sharing, or stock-bonus plan under Internal Revenue Code Section 401(a) (including a 401(k) plan).
  • an annuity plan under IRC Section 403(a).
  • an annuity contract or custodial account under IRC Section 403(b).
  • a simplified employee pension (SEP) under IRC Section 408(k).
  • a SIMPLE retirement account under IRC Section 408(p).
  • a trust described in IRC Section 501(c)(18).
  • a plan for federal, state, or local government employees or by an agency or instrumentality thereof (other than a 457(b) plan).

Active participant

Generally, an employee is an active participant if covered by a:

  • defined contribution plan (for example, a 401(k) plan) for any tax year and is credited with any contributions or forfeitures, or
  • defined benefit plan for any tax year that the employee is eligible to participate.

Don’t check the retirement plan box if your company only has non-qualified or 457(b) plans.”

 

Thank you.



That’s correct, they are not an active participant if the only plan is any type of 457 account, and the W-2 retirement plan box should not be checked for such employees. The result is that this plan type does not result in an income limit to deduct an IRA contribution, although any spouse’s participation in other plans must be considered in determining if an IRA contribution can be deducted.

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