Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: My unmarried client wants to contribute to a deductible traditional IRA this year, but she is a participant in a governmental Section 457 plan.  Is she an active participant in a qualified plan, making her ability to contribute to an IRA potentially subject to phase-out based on income?

Answer: No.

Participation in a 457(b) plan maintained by a government or a non-profit is not taken into consideration when determining if an employee is an active member of a plan for deductible IRA contribution purposes.

Here’s an excerpt from IRC Section 219(g)(5)

An eligible deferred compensation plan (within
the meaning of section 457(b)) shall not be treated as a plan
described in subparagraph (A)(iii).

The client may contribute up to $5,000 to a deductible IRA for 2011 if younger than 50, or $6,000 if 50 or older.

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