Q: How does an individual determine if he is an active participant?

A: If an individual is  an active participant, his employer should provide him with that information by checking the retirement plan box in section 13 on his Form W-2, Wage and Tax Statement. However, as mistakes can be made, one should familiarize himself with the rules. In general, an individual is an active participant based on the type of plan in which he participates and when the contribution was deposited to the account. The following are examples:

• Defined-Benefit Plan: An individual is an active participant if he is eligible to participate in the plan, whether or not he participates
• Money-Purchase Pension and Target-Benefit Plan : He is  an active participant for the year for which the contribution is made, regardless of what year it is deposited to the account. For instance, if the contribution is for the 2007 plan year, but it is deposited in 2008, he is an active participant for 2007.

More details in the IRA Deductibility Cheat Sheet

Back to IRA Deductibility FAQ

Featured Product/s

• RetirementWorks® II ("RW2")
• Appleby Cheat Sheets .