Purpose

The purpose of this bulletin is to explain why the Retirement Plan checkbox in Box 13 of Form W-2 must be checked for most employees and left unchecked for others.

Affected Employees

Employees receiving a 2020 Form W-2 are affected.

Background

Internal Revenue Service (IRS) Instructions for Form W-2 require that the Retirement Plan check box in Box 13 be checked for every employee who is either:

• Covered* by an employer provided retirement plan; or

• An active participant for any part of 2020 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-A - 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.

IRS Regulations require the Checkbox to be checked for all employees who were eligible to participate in a defined benefit plan and/or contributed or received employer contributions to a defined contribution plan (401(k) or 403(b)) in the current tax year. Nearly all State of New York government positions, including part-time, hourly, and seasonal, provide eligibility for retirement system membership. Therefore, most State of New York employees are considered covered and will have the Retirement Plan check box checked on their 2020 Form W-2.

Effective Dates

Effective immediately.

Exceptions to checking the Retirement Plan Check Box

Certain employees and positions are not covered by a retirement plan and should not have the Retirement Plan check box checked.

According to IRS Active Participant Rules (Notice 98-49, 1998-2 C.B. 365; Notice 87-16, 1987-1 C.B. 446), employees receiving retirement benefits from a previous employer’s plan are not considered covered by that plan.  Therefore, most rehired retirees (commonly known as Section 211 and 212 employees) 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 Form W-2 Retirement Plan check box in Box 13 checked, unless they are making contributions to a 403(b) plan.

W-2 Box 13 Retirement Plan Checkbox Decision Chart

In accordance with the IRS Publication for the General Instructions for Form W-2, the following table highlights the end result required for the applicable, independent scenarios on behalf of NYS employees:

Note:  Contributing to a 457(b) Deferred Compensation does not affect whether the Retirement Plan Checkbox is checked; that is determined by the employee eligibility for a Defined benefit or 403(b) Defined contribution plan.

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 check box being checked.

As explained in Publication 590-A, limits on the amount that can be deducted do not affect the amount that can be contributed.  The IRS utilizes the Retirement Plan check box 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 check box 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, 2020 and uncheck the Retirement Plan check box 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 New York State prior to January 1, 2020.

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, with an Excel spreadsheet, to the Tax and Compliance mailbox containing the Department ID, employee name, and the complete NYS EMPLID number of all employees for whom OSC should uncheck the Retirement Plan check box no later than December 7, 2020.

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 2020 to any of the following 403(b) plans before requesting OSC to uncheck the Retirement Plan check box:

400 – CUNY 403 ROTH
403 – Supplemental Retirement Annuity CUNY
404 – SUNY 403(b) Plan
412 – SUNY 403(b) ROTH
413 – NBE Tax Deferred Annuity
414 – NYT Tax Deferred Annuity
432 – ED TDA Copeland

Questions

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