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Date: October 31, 2011

Bulletin Number: 1096

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Subject

Retirement Plan Checkbox on Form W-2

Purpose

To explain why the Retirement Plan Checkbox in Box 13 must be checked for most employees and left unchecked for others.

Affected Employees

All employees receiving a 2011 Form W-2.

Effective Date(s)

Immediately.

Background

Internal Revenue Service (IRS) Instructions for Form W-2 require that the Retirement Plan Checkbox in Box 13 be checked for all employees who are either:

        ●  Covered* by an employer provided retirement plan

            or

        ●  Were an active participant for any part of 2011 in an
            annuity account described in IRC Section 403(b) -       
            applicable only to employees of SUNY, CUNY and the
            NYS Education Department.

*IRS Publication 590 – Individual Retirement Arrangements (IRAs) clarifies that if an employer provides a retirement plan, any individual that is eligible to join the plan is considered covered by the plan even if the individual elects not to join or does not contribute to the plan.

Nearly all State of New York government positions provide eligibility for retirement system membership.  Therefore most State of New York employees are considered covered and will have the Retirement Plan Checkbox checked on their 2011 Form W-2.

Exceptions to Checking the Retirement Plan Checkbox

There are certain employees and positions not covered by a retirement plan for which the employee should not have the Retirement Plan Checkbox checked. 

According to IRS Active Participant Rules (Notice 87-16, I.R.B. 1987-5), employees receiving retirement benefits from a previous employer’s plan are not considered covered by that plan.  Therefore, most rehired retirees receiving benefits from a retirement system of the State of New York as a result of previous state, city or municipal employment, should not have their W-2 Retirement Plan Checkbox in Box 13 checked.   

Impact of Retirement Plan Eligibility to Traditional Individual Retirement Arrangements (IRA’s)

Employees should be aware that they are not prevented from making contributions to a traditional Individual Retirement Arrangement as a result of the Retirement Plan Checkbox being checked.

As explained in Publication 590, limits on the amount that can be deducted do not affect the amount that can be contributed. The IRS utilizes the Retirement Plan Checkbox in Box 13 to determine what amount, if any, the employee is eligible to take as an IRA deduction on their individual tax return based on their income and filing status.

OSC Actions

OSC will automatically check the Retirement Plan Checkbox in Box 13 for all employees as a default.

OSC will identify employees who have retired from the State of New York subsequent to the conversion to PayServ and prior to January 1, 2011 and uncheck the Retirement Plan Checkbox in Box 13 for these employees.  

Agency Actions

OSC is unable to identify:

  1. Pre-PayServ retirees of the State of New York

    or

  2. Employees who retired from a local level government employer in the New York State prior to January 1, 2011.  

As a result, OSC must rely on agencies to identify employees that meet either of these conditions. 

After these employees have been identified, agencies must send an email to the Tax and Compliance mailbox containing the DeptID, employee name, and the last 4 digits of the EmplID of all employees OSC should uncheck the Retirement Plan checkbox for.

SUNY, CUNY and NYS Education Department agencies must carefully review the payroll records of rehired retirees to confirm that the employee did not make 403(b) contributions during 2011 to any of the following 403(b) plans before requesting OSC to uncheck the Retirement Plan Checkbox.

403 - Supplemental Retirement Annuity CUNY
404 - Supplemental Retirement Annuity Program
408 - SUNY TDA Fidelity
413 - NBE Tax Deferred Annuity
414 - NYT Tax deferred Annuity
415 - SUNY Tax Deferred Annuity
417 - HRC TDA
419 - CUNY TDA Copeland
432 - ED TDA Copeland

Questions

Questions regarding this bulletin should be directed to the Tax and Compliance mailbox.