Form w-2

[Guest Benmark]

Box 13 of the W2 indicates whether or not someone is participating in a retirement plan. From my understanding, if a 401(k) is the only plan offered and the employee is NOT participating but eligible, that box should still be checked. Correct?

[E as in ERISA]

No. This is one place where you don't follow the general rule of eligibility equals participation. The person had to have something allocated to their account in order for the box to be checked -- a deferral, employer contribution, forfeiture, etc.

[Lori Friedman]

The box is checked for someone who's an "active participant" in an employer's plan. For a defined contribution plan, including a 401(k) arrangement, "active" participation means that there's been an employer or employee contribution (or forfeiture) added to the individual's account. The contribution doesn't have to be vested; even if the employee has 0 vested interest in the contribution, he/she is still covered by the plan.

I think that Box 13 is a breeding ground for Form W-2 filing errors. So many employers check the box when it shouldn't be checked, or ignore the box even though it applies.