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February 28, 2009

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

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

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

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 Quick Reference Guide

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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