Covered By Retirement Plan?
Hello-
Self-employed individual that files on Schedule C is setting up a new 401k (profit sharing only contributions) and defined benefit cash balance plan for 2021. Would you they considered to be covered by a retirement plan in 2021 if they set these plans up now and contribute or could they still make deductible IRA contributions (if other applicable rules are met)?
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2022-02-10 20:57
The individual is a 2021 active participant according to the following definition:
“Defined Benefit Plan The individual is an active participant if he/she is not excluded under the eligibility provisions of the plan for the plan year ending with or within the individual’s taxable year ,regardless of whether the individual has elected to decline participation in the plan, has failed to make a mandatory contribution specified under the plan or has failed to perform the minimum service required to accrue a benefit under the plan.”