Is a 457 plan in lieu of SS a "retirement plan"?

Question

A worker has a regular job with no 401(k).

He also has a few hours each week at a local high school. In Massachusetts, teacher income is not subject to Social Security tax. He sees his paycheck shows a 7.5% deduction for a 457 plan, but isn't offered any option for any increased amount.

Does this 457 deposit count as 'retirement plan' for purposes of being able to have a pre-tax IRA deposit? His AGI is over the limit, but if not covered by a plan at work, can deduct.

Since this 7.5% is instead of Social Security, does it still count as a retirement plan for this purpose?

Phil Marti · Accepted Answer

Maybe. If he had the same situation in 2012 tell him to check his W-2 to see whether the "retirement plan" box is checked.  Or he can ask at work. Phil Marti VITA/TCE Volunteer Clarksburg, MD

Alan · Answer

Highly likely he is a member of the Massachusetts Deferred Compensation SMART Plan. The 7.5% comes out of his pay pre-tax. He would be considered actively participating in a retirement plan at work for purposes of making tax deductible contributions to AN IRA.

JoeTaxpayer · Answer

Thank-you both, Alan/Phil. Just started this year so will wait to see how W2 reflects this. Unfortunate if a couple thousand dollars PT income negates the ability to use a pretax IRA. Hopefully the box isn't checked.

Is a 457 plan in lieu of SS a "retirement plan"?

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