Retirement plan

[gman]

If taxpayer is eligible to participate in a retirement plan through work, but does not, can they contribute to a traditional IRA?
Income would limit contribution amount if participated in a plan. The retirement box is checked on w-2

[kamckinley]

I don't think it matters if they participated in the plan or not, it's whether they are eligible to participate or are "covered" by a plan. From the IRS website,

"You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:
Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;

IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or

Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.
Box 13 on the Form W-2 you receive from your employer should contain a check in the “Retirement plan” box if you are covered. If you are still not certain, check with your (or your spouse’s) employer.
The limits on the amount you can deduct don’t affect the amount you can contribute. However, you can never deduct more than you actually contribute."

Check his W-2 to see if the retirement plan box is checked, but my guess is it is. In that case, he can contribute to an IRA but deductions will be limited.

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/2014-IRA-Contribution-and-Deduction-Limits-Effect-of-Modified-AGI-on-Deductible-Contributions-If-You-ARE-Covered-by-a-Retirement-Plan-at-Work

[Gary2]

I don't think it matters if they participated in the plan or not, it's whether they are eligible to participate or are "covered" by a plan. From the IRS website,

"You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:
Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year [emphasis added];

On first reading, this suggests that if you could have participated in the 401(k), but didn't, then you wouldn't be covered by a retirement plan since no contributions were allocated to your account.

But note that "plan year" might not be the same as "tax year", which could complicate things.

[Roberts]

If it is a defined CONTRIBUTION plan which is voluntary, you must PARTICIPATE to be considered covered.

[Burke]

On first reading, this suggests that if you could have participated in the 401(k), but didn't, then you wouldn't be covered by a retirement plan since no contributions were allocated to your account.

But note that "plan year" might not be the same as "tax year", which could complicate things.

This is correct. Companies often check the retirement box as the TP may be covered by a retirement plan. But if he did not participate (i.e, make any contributions for the entire year, then he can do an IRA. I think there was a court case on this, but don't have time to research right now.