IRA contribution in year separated from service
Left employment and took complete distribution of all 401k funds in 2007.
Form W-2 box labeled ‘retirement plan coverage’ for year was NOT checked by employer. Income is too much to contribute to traditional IRA if considered a qualified participant.
Question: Is the W-2 correct since was a plan participant in 2007 before leaving the company? Don’t want to contribute if W-2 is in error on this point.
I thought being a qualified participant AT ANY POINT during a year was a disqualifier for entire year. Thus no traditional IRA contribution would be allowed.
Thanks in advance for any insight on this.
Permalink Submitted by Tim P Koupal on Wed, 2008-03-05 19:40
To clarify previous post, NO contributions were made to 401k in 2007. Only activity was distribution to rollover IRA after I left employment.
Permalink Submitted by Alan Spross on Wed, 2008-03-05 19:58
The W-2 is probably correct, but not necessarily so. From the following definition, you can see that your account might have received a contribution even though you did not contribute. It might have received a forfeiture contribution or allocation under a company profit sharing formula.
You might call the employer to confirm the accuracy of the W-2 if you wish, or you could assume it is correct and make the IRA contribution, and if it turns out to be incorrect, you could withdraw the contribution, consider it a non deductible contribution, or perhaps recharacterize it to a Roth contribution if your income permits that.
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401(k), 403(b), Salary deferral SEP, SIMPLE IRA The individual is an active participant if the individual elects to defer compensation (make salaryd deferral contributions) to the to a plan If the individual is eligible to make salary deferral contributions, but declines to make such salary deferral contributions for a year, and no other contributions or forfeitures are allocated to such individual’s account for the plan year ending with or within the individual’s taxable year, the individual is not an active participant for that year.
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