Determining Whether You Are Covered by Another Retirement Plan

If you are covered by an employer plan, the “Retirement Plan” box on your Form W-2 should be checked.  Determining the years for which you are covered depends on whether the plan is a defined contribution plan or a defined benefit plan.

Under a defined contribution plan, a separate account is set up for each beneficiary.  The amount to be contributed to the plan is defined, and the level of benefits depends on the amount contributed and the earnings on the account.  Defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans.  You are considered covered for the year if the defined amounts are contributed or allocated to your account for the plan year.

Under a defined benefit plan, the level of benefits is defined and the plan administrator determines the amount that needs to be contributed to the plan in order to provide those benefits.  Defined benefit plans include pension plans and annuity plans.  You are considered covered for the year if you are eligible to participate, even if you declined to participate, did not make a required contribution, or did not meet the minimum service requirement to accrue benefits under the plan.  The fact that you were eligible to participate means that you were covered under the plan for purposes of determining the phase-out of the maximum contribution you can make to your IRA.