Am I considered covered by an employer sponsored retirement plan
for the year if I do not participate in the plan or if I did not work long
enough to be vested?
The answer to this question depends on your type of retirement plan. Generally,
if your employer's plan has a separate account for each employee, it is a
defined contribution plan. If any amount was contributed or allocated by you
or your employer to your account, you are considered covered. It does not
matter if you have worked long enough to be vested.
In the other type of plan, a defined benefit plan, the employer must make
enough contributions (together with earnings) to provide the retirement benefit
promised in the retirement plan. In this type of plan, if you meet the minimum
age and years of service requirements to participate in your employer's plan,
you are considered covered. It does not matter if you are vested.
The Form W-2 (PDF) you receive from your employer
has a box used to indicate whether you were covered for the year. The "Pension
Plan" box should have a mark in it if you were covered.
This is the first year that I received retirement benefits. Are
any of my benefits taxable?
If you receive retirement benefits in the form of pension or annuity payments,
the amounts you receive may be fully taxable, or partly taxable in the year
received. Refer to Tax Topic 410, Pensions and Annuities, for
detailed information, or Publication 575, Pension and Annuity Income.
For social security and equivalent railroad retirement benefits, refer to Tax Topic 423 or Publication 915, Social Security and Equivalent Railroad
Retirement Benefits.
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