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Eligibility for a Deductible IRA Contribution

Q. To determine whether my client is eligible for a deductible IRA contribution, I explained that if he is covered under a retirement plan through his employer, he must qualify for the deductible IRA under the adjusted gross income (AGI) test. The employer offers a voluntary (elective deferrals only) 403(b) plan, but my client doesn’t participate in it. Is he considered to be “covered under a retirement plan”?

A. No. In a voluntary 403(b) plan, only employees who participate (or hold accounts) in the plan must qualify through AGI limits to have the deductible IRA. Simply being eligible to participate in a voluntary plan is not considered “covered under a retirement plan”!