3666 / Who is an “active participant” for purposes of IRA eligibility rules and deduction limits?

(1)   a qualified corporate or Keogh pension, profit sharing, stock bonus, or annuity plan;

(2)   a simplified employee pension or SIMPLE IRA;

(3)   a Section 403(b) tax sheltered annuity; or

(4)   a government plan.

In those instances, the individual’s deduction limit for contributions to a traditional IRA may be reduced or eliminated ( Q ). The limitation applies if the individual or the individual’s spouse was an active participant for any part of the plan year that ended with or within the taxable year.¹

Participation in Social Security, Railroad Retirement (tier I or II), or in an eligible IRC Section 457 deferred compensation plan ( Q 3581) is not taken into consideration.² Federal judges are treated as active participants.³ Active participants include any individual who is an active participant in a plan established for employees by the United States, a state or political subdivision thereof, or an agency or instrumentality of any of the foregoing.⁴