Rev. date: 1/1/2011The answer to this question depends on the 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.
-
If you are eligible for a 401(k) plan you are considered covered,
even if you choose not to make contributions.
-
It does not matter if you have worked long enough to be vested
in employer contributions (you are always immediately vested in your own
contributions).
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.
-
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 not vested in your benefits.
The
Form W-2
(PDF) you receive from your employer has a box used to indicate whether you were
covered for the year. The "Retirement Plan" box should be checked if you were
covered in a plan sponsored by the employer.
Rev. date: 8/31/2010If you default on a loan from your 401(k) plan:
For example, the 10% additional tax on early distributions does
not apply if all the following apply to you:
-
You received the distribution after you left your employer;
and
-
Your departure from the employer occurs during or after the
calendar year in which you reached age 55; and
-
Your departure from the employer qualifies as a separation
from service.
There are a number of exceptions to the 10% additional tax on
early distributions. You may wish to refer to Instructions for
Form 5329,
Additional Taxes on Qualified Plans (Including IRAs) and Other
Tax-Favored Accounts
Publication 575,
Pension and Annuity Income, and
Publication 560,
Retirement Plans for Small Business, for additional information.
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