Question on W2 Box 13

[khn]

My understanding is that this box should be checked if an employee is an active participant in a 401k plan, meaning if they have employee or employer contributions are allocated to their account for the plan year. If the only contribution is a year-end employer contribution, then employee would be considered an active participant for the year.

In the case where a person is not contributing but receives a discretionary company contribution (i.e., QNEC), what if the company elects not to make a contribution after the year end earnings are calculated? If we have already checked the box and then the company ends up not contributing a match it would seem to create a problem.

What to do in this situation?

[masteff]

Issue a corrected W-2.

[GMK]

Consider issuing a W-2c with the correction.

http://www.irs.gov/pub/irs-access/fw2c_accessible.pdf

And if possible, hold off on issuing W-2's until later in January, assuming the contribution election is made in time.

[BG5150]

Has this ever come up in anyone's audit ever?

[Tom Poje]

if I recall (but the brain gears are getting plenty rusty) if this box is checked it

tells the govt the person has received something in a retirement plan and therefore

any IRS contribution might be limited.

not sure what else the purpose of this box is.

[masteff]

not sure what else the purpose of this box is.

That's basically it. http://www.irs.gov/Retirement-Plans/Common-Errors-on-Form-W2-Codes-for-Retirement-Plans "If this box is checked, it lets the recipient know that depending on their filing status and modified adjusted gross income, they may not be entitled to a full deduction for their traditional IRA contributions."

[Flyboyjohn]

Simple solution- guidance allows you to check the box on a cash basis (check the box based on the year the contribution is actually deposited rather than the year it's "for")