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Subject:  Re: 401k , IRA, ROTH..can I hv all 3? Date:  2/9/2013  2:27 AM
Author:  BruceCM Number:  71360 of 96962

If nothing is contributed to your employer sponsored retirement plan for you in a given year, then you will not be an 'active participant', thus you can deduct your contribution to your traditional IRA regardless of your Adjusted Gross Income.

Sorry. This is not correct. When it comes to IRA deductibility, there is nothing in the rules about being an 'active participant' in a retirement plan - the rules are based on whether you are 'covered' by a retirement plan. And it only takes one day of being covered to limit your deductibility for the entire year. From IRS Pub 590

No, it is exactly correct.

Defined contribution plans (other than 457(b) or 409(A) plans), for which a contribution is made, from any source, will render the employee an 'activie pariciptant', subject to AGI phase out rules for deductibility of the employee's contributions to their traditional IRA. From IRS §219(g)(3)(B)(ii), paragraph (g) states:

(g) Limitation on deduction for active participants in certain pension plans ......,

In this context, the 'covered' rule refers to an employer's defined benefit pension plan, for which an employee is considered an active participant even if that employee elects not to participate and receives no contribution to the plan for which they are otherwise eligible.

The Retirement Dictionary summarizes this with appropriate IRS references:

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