January 16, 1991
TO: PENSION MEMBERS NO. 2-91
RE: PARTICIPANTS IN FROZEN PLANS INELIGIBLE FOR IRA DEDUCTION
__________________________________________________________
As you are aware, individuals with incomes in excess of a
certain level and who are active participants in a pension plan
are denied deductions for IRA contribution. The Internal Revenue
Service recently announced that a participant in a pension plan
which was frozen pursuant to Model Amendment 2 or 3 of Notice 88-
131 is generally considered an active participant in a pension
plan for purposes of determining whether IRA contributions are
deductible. The Service concluded that this result applied for
employees in either defined benefit or defined contribution plans
whose benefit accruals have been suspended pursuant to the model
amendments. However, these employees cease to be active
participants if the employer does not intend to accrue additional
benefits under the plan.
IRS Announcement 91-11 is attached. We will keep you
informed of further developments.
W. Richard Mason
Assistant General Counsel
Attachment