Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
Joel,

You quoted the proper passage in Pub 590, but you went on to say that...

If neither you nor your employer contribute to your 401(k) during a plan year that ends in the current year and your employer still lists you as covered on your W-2, you should fight it.

But the rule also talks about funds that are allocated to an employee's account. In plans that have a company match, for instance, the match is often vested over three years or so. If a plan member leaves the employer before being fully vested in the match, that portion that is not vested is allocted to all other plan members, whether they've made contributions in that year or not.

So, you could rightly come across a situation where the employee, having not made any contributions, sees the box for retirement plan checked on the W-2 for no other reason than there was an allocation of non-vested company matches. The employee will insist that the company is wrong, but in most cases the W-2 is correct.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.