Originally Posted: February 26, 2003
Current tax law allows workers to be covered by an employer retirement plan and also establish their own Individual Retirement Arrangement (IRA). Workers having both of these retirement arrangements are subject to various restrictions. For example, those covered by an employer plan who exceed certain income levels cannot deduct their IRA contributions from their income for tax purposes. The interrelationship between these different retirement arrangements has recently changed.
The Internal Revenue Service announced, "For plan years beginning after 2002, [establishments with] a qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. If the separate account or annuity otherwise meets the requirements of an IRA, it will only be subject to IRA rules. An employee’s account can be treated as a traditional IRA or a Roth IRA."
"For this purpose, a ‘qualified employer plan’ includes:
Source: "Important Changes for 2003," in Individual Retirement Arrangements (IRAs), Publication 590 (Internal Revenue Service), p. 4.