Active Participant – T-IRA Deductibility
Is a participant that is eligible to defer into his 401(k) but chooses not to considered an “active participant” for purposes of making a deductible IRA contribution? What IRC code or section in IRS.gov can i find the answer? I am receiving conflicting answers
Thank you
Permalink Submitted by Alan - IRA critic on Wed, 2017-01-25 22:16
The definition is included in IRS Reg 1.219(d). I cannot post it due to the spam filter. Basically it states that if any contribution is made to the account of the employee FOR the plan year, they are an active participant.
Permalink Submitted by William Tuttle on Wed, 2017-01-25 22:42
The participant has to make a deferral, the employer has make a contribution, or there has to be forfeitures deposited to the employee’s account to make the employee an active participant. Participants who make no deferral are suprised to find that if the company has, say a 3% non-elective employer contribution, that makes them an “active” participant even though they took no action.
Permalink Submitted by Alan - IRA critic on Wed, 2017-01-25 22:56
Of course, if the plan offers a DB plan the W-2 retirement box will be checked even if there is also a 401k plan which receives no contribution of any type for the plan year.