Active participants in an employer retirement plan are subject to the phaseout rules for deducting contributions (8.4). When a married couple files jointly and only one of the spouses was an active plan participant for the taxable year, a more favorable phaseout range applies to the non-participant spouse than to the spouse who was an active participant (8.4).
An employer retirement plan means:
If your employer checks the “Retirement plan” box within Box 13 of your 2012 Form W-2, this indicates that you were an active participant in your employer’s retirement plan during the year. If you want to make a contribution before you receive your Form W-2, check the following guidelines and consult your plan administrator for your status.
Under any type of plan, if you are considered an active participant for any part of the plan year ending with or within your taxable year, you are treated as an active participant for the entire taxable year. Because of this plan year rule, you may be treated as an active participant even if you worked for the employer only part of the year. Under IRS guidelines, it is possible to be treated as an active participant in the year of retirement and even in the year after retirement if your employer maintains a fiscal year plan.
The plan year rule works differently for defined benefit pension plans than for defined contribution plans such as profit-sharing plans, 401(k) plans, money purchase pension plans, and stock bonus plans. These rules are discussed below.
If you are married, and either you or your spouse is treated as an active participant for 2011, see 8.3 for the effect on the other spouse.
You are treated as an active participant in a defined benefit pension plan if, for the plan year ending with or within your taxable year, you are eligible to participate in the plan. Under this rule, as long as you are eligible, you are treated as an active participant, even if you decline participation in the plan or you fail to make a mandatory contribution specified in the plan. Furthermore, you are treated as an active participant even if your rights to benefits are not vested.
For a defined contribution plan, you are generally considered an active participant if “with respect to” the plan year ending with or within your taxable year (1) you make elective deferrals to the plan; (2) your employer contributes to your account; or (3) forfeitures are allocated to your account. If any of these events occur, you are treated as an active participant for that taxable year, even if you do not have a vested right to receive benefits from your account.
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