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Date: October 26, 2010

Bulletin Number: 1017

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Subject

Retirement Plan Check box on Form W-2

Purpose

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

Affected Employees

All employees receiving a 2010 Form W-2


Effective Date(s)

Immediately.


Background

IRS Instructions for Form W-2 require that the Retirement Plan Check box 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 2010 in an annuity account described in section 403(b) - applicable only to employees of SUNY, CUNY and the NYS Education Department.

IRS Publication 590 clarifies that if an employer provides a retirement plan, an individual that is eligible to join the plan is considered covered by the plan even if the individual has not elected to join or does not contribute to the plan.

Nearly all employment positions in New York State government offer retirement system membership.  Therefore most New York State employees are considered covered and will have the Retirement Plan check box checked on their 2010 Form W-2.

Exceptions to  Checking the Retirement PlanCheckbox

There are certain employees and positions in New York State government not covered by a retirement plan for which employees 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 New York State as a result of previous state, city or municipal employment, should not have their Retirement Plan Checkbox in Box 13 checked.

Therefore, most rehired retirees receiving benefits from a retirement system of New York State as a result of previous state, city or municipal employment, should not have their 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.

The Retirement Plan Checkbox in Box 13 is used by the IRS to determine an employee’s IRA deduction limit.  As explained in Publication 590, limits on the amount that can be deducted do not affect the amount that can be contributed.


OSC Actions

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

OSC will then identify employees who have retired from New York State subsequent to the conversion to PayServ and prior to January 1, 2010 and uncheck the Retirement Plan Checkbox in Box 13 for these employees.


Agency Actions

OSC is unable to identify pre-PayServ retirees of New York State and employees who retired from a local level government employer of New York State prior to January 1, 2010.   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 2010 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.