IRA eligibility with 401(k) Plan

[richard]

Question: Can an individual who is eligibile to participate in a 401(k) plan but chooses not to do so contribute to a deductible IRA?

An individual earning above a certain dollar level cannot contribute to a deductible IRA if he is a participant in a qualified plan.

In a profit sharing plan, to "participate" means to receive an allocation of contribution or forfeiture.

Also, an employee cannot "waive" participation in a plan to become eligibile for a deductible IRA.

So, what about a 401(k) Plan? If an employee is eligibile for the 401(k) plan and doesn't elect to defer, can he make a deductible IRA contribution? Does it matter whether or not there is a match?

Thanks.

[Guest]

an individual is treated as active only if he receives a contribution or forfeiture. if you choose not to defer (assuming no profit sharing contrib or forfeitures are allocated) you are not active for IRA purposes. note this is different logic than for 410(B) see 1.219-2(e)

and note, if plan year end is 12/31/98 and profit sharing contribution was made for the 98 year, but deposited in 99, then ee is active in 99, not 98!

[Dave Baker]

Remember though, that the individual is hosed if his account receives any amount in the form of allocations of forfeitures or employer profit-sharing contributions.