Frozen DB Plan - W2 Box 13

[Guest notapensiongeek]

We have a frozen DB plan and the CPA is asking us if she should check Box 13 of the W-2 (Retirement Plan). Any thoughts?

Thanks!!

[Guest Carol the Writer]

I am not a W-2 geek. However, if the box you are referring to is "Check here if the employee is an active participant in a qualified retirement plan," the answer is that NO, it should not be checked. The plan is frozen and so there were no accruals for 2006, assuming the effective date of the freeze was 1/1/2006 or earlier. So, the freeze date governs the checking of the box. Good luck! Carol Caruthers, MSPA, EA

[Guest notapensiongeek]

The plan was frozen effective 7/1/2005. The plan's valuation dates are 12/31. Does this change the answer?

[SoCalActuary]

The phase-out of IRA deductions applies when a participant is active in a company sponsored pension plan.

This plan was frozen before the start of the 2006 calendar year, so it would be unfair to prevent employees from participation in their own IRA for 2006 in this situation.

[david rigby]

I agree that it would be unfair. However, we are talking about the IRS here. The W-2 instructions for that box refer to IRS Publication 590, IRS Notice 98-49, and IRS Notice 87-16. Notice 87-16 is the most significant of the three; Q&A16 supports the analysis given by SoCal, but read carefully.

The user may wish to have legal or tax advisor provide input on the proper interpretation.