Active participant on w-2

[ombskid]

An employee is eligible for the first time on 8/1/2009 for the 7/31/2010 fiscal year 401k profit sharing plan. The employee makes no salary deferral contributions. The employer makes a contribution for the employee in January 2011 for the 7/31/2010 year.

Is the employee an active participant for w-2 reporting purposes for 2010?

[masteff]

I'd say yes.

Generally, in the case of a defined contribution plan, an individual shall be an active

participant if employer or employee contributions or forfeitures are allocated to such

individual's account with respect to a plan year ending with or within the individual's

taxable year. For example:

Company B sponsors a money purchase pension plan with a plan year ending

on June 30. The plan provides that contributions must be allocated as of the last

day of the plan year. On December 31, 1987, an individual employed by the

Company separates from service. The contribution for the plan year ending on

June 30, 1988 is not made until February 15, 1989, when the Company files its

corporate return. In this case, the individual is an active participant for such

individual's 1988 taxable year.

http://www.irs.gov/pub/irs-tege/notice87_16.pdf

[Bird]

I'd say no, if it is purely discretionary; the next paragraph reads:

A special rule applies to certain plans in which it is impossible to determine whether or

not an amount (other than earnings) will be allocated to an individual's account for a

given plan year. If, with respect to a particular plan year, no amount attributable to

forfeitures, employer contributions or employee contributions has been allocated to an

individual's account by the last day of the plan year, and contributions to the plan are

purely discretionary for the plan year, such individual shall not be an active participant

for the taxable year in which such plan year ends. If, however, after the end of such plan

year, the employer contributes an amount for such plan year, an individual to whose

account an allocation is made shall be an active participant for the taxable year in which

the contribution is made.

[ombskid]

I'd say no, if it is purely discretionary; the next paragraph reads:

A special rule applies to certain plans in which it is impossible to determine whether or

not an amount (other than earnings) will be allocated to an individual's account for a

given plan year. If, with respect to a particular plan year, no amount attributable to

forfeitures, employer contributions or employee contributions has been allocated to an

individual's account by the last day of the plan year, and contributions to the plan are

purely discretionary for the plan year, such individual shall not be an active participant

for the taxable year in which such plan year ends. If, however, after the end of such plan

year, the employer contributes an amount for such plan year, an individual to whose

account an allocation is made shall be an active participant for the taxable year in which

the contribution is made.

Thanks. I think there is something about it in Pub 590