Elect out of 401(k)plan

[Guest mbaker]

If an employee elects out of the plan, can he still contribute to a traditional IRA.

There seems to be a lot of employers who mark the Pension Box on the W-2 and claim they are right. I thought Notice 87-16 covered this to prove they are wrong. Any comments??

Thanks Milton

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[Alf]

Electing out of a 401(k) plan itself raises several questions, but if it is done properly and the employee does not get ANY contribution under the 401(k) plan (profit-sharing, QNEC, top-heavy minimum, etc.), they should be eligible to make a deductible IRA contribution. Of course, any employee can make a nondeductible contribution to a traditional IRA, even if they are active participants in a 401(k) plan.