401(a) non-contributing

[Catherine]

Question came up today:

Client has a 401a plan at work; she does not contribute. Employer contributes for her.

Can she deduct an IRA contribution? I can't find definite reference that she can OR that she can't.

Thanks.

[jklcpa]

If you have a CCH 2008 Master Tax Guide, it's at para 2170 under Active Participant Defined. It's found in code sec 219(g).

Basically, whether it's a MPP or prof sharing plan, an employer contribution or a forfeiture allocated to the employee's account causes that employee to be actively participating. The employee's W-2 should be marked as such.

Your question should be not whether she can contribution (because she can), but how much is deductible if she does. Just follow the rules for your client's age and AGI limits for an individual participating in an employer plan to determine the deductible portion of any amount contributed to the IRA.

[Catherine]

If you have a CCH 2008 Master Tax Guide, it's at para 2170 under Active Participant Defined. It's found in code sec 219(g).

Basically, whether it's a MPP or prof sharing plan, an employer contribution or a forfeiture allocated to the employee's account causes that employee to be actively participating. The employee's W-2 should be marked as such.

Your question should be not whether she can contribution (because she can), but how much is deductible if she does. Just follow the rules for your client's age and AGI limits for an individual participating in an employer plan to determine the deductible portion of any amount contributed to the IRA.

Thank you; it confirms what I told her last week. But the TIAA-CREF rep told her yesterday that I was wrong, wrong, wrong -- so I needed to check myself. And being a sole practitioner, this is where I can check.