[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.219-2]

[Page 382-384]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.219-2  Definition of active participant.

    (a) In general. This section defines the term active participant for 
individuals who participate in retirement plans described in section 
219(b)(2). Any individual who is an active participant in such a plan is 
not allowed a deduction under section 219(a) for contributions to an 
individual retirement account.
    (b) Defined benefit plans--(1) In general. Except as provided in 
subparagraphs (2), (3) and (4) of this paragraph, an individual is an 
active participant in a defined benefit plan if for any portion of the 
plan year ending with or within such individual's taxable year he is not 
excluded under the eligibility provisions of the plan. An individual is 
not an active participant in a particular taxable year merely because 
the individual meets the plan's eligibility requirements during a plan 
year beginning in that particular taxable year but ending in a later 
taxable year of the individual. However, for purposes of this section, 
an individual is deemed not to satisfy the eligibility provisions for a 
particular plan year if his compensation is less than the minimum amount 
of compensation needed under the plan to accrue a benefit. For example, 
assume a plan is integrated with Social Security and only those 
individuals whose compensation exceeds a certain amount accrue benefits 
under the plan. An individual whose compensation for the plan year 
ending with or within his taxable year is less than the amount necessary 
under the plan to accrue a benefit is not an active participant in such 
plan.
    (2) Rules for plans maintained by more than one employer. In the 
case of a defined benefit plan described in section 413(a) and funded at 
least in part by

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service-related contributions, e.g., so many cents-per-hour, an 
individual is an active participant if an employer is contributing or is 
required to contribute to the plan an amount based on that individual's 
service taken into account for the plan year ending with or within the 
individual's taxable year. The general rule in paragraph (b)(1) of this 
section applies in the case of plans described in section 413(a) and 
funded only on some non-service-related unit, e.g., so many cents-per-
ton of coal.
    (3) Plans in which accruals for all participants have ceased. In the 
case of a defined benefit plan in which accruals for all participants 
have ceased, an individual in such a plan is not an active participant. 
However, any benefit that may vary with future compensation of an 
individual provides additional accruals. For example, a plan in which 
future benefit accruals have ceased, but the actual benefit depends upon 
final average compensation will not be considered as one in which 
accruals have ceased.
    (4) No accruals after specified age. An individual in a defined 
benefit plan who accrues no additional benefits in a plan year ending 
with or within such individual's taxable year by reason of attaining a 
specified age is not an active participant by reason of his 
participation in that plan.
    (c) Money purchase plan. An individual is an active participant in a 
money purchase plan if under the terms of the plan employer 
contributions must be allocated to the individual's account with respect 
to the plan year ending with or within the individual's taxable year. 
This rule applies even if an individual is not employed at any time 
during the individual's taxable year.
    (d) Profit-sharing and stock-bonus plans--(1) In general. This 
paragraph applies to profit-sharing and stock bonus plans. An individual 
is an active participant in such plans in a taxable year if a forfeiture 
is allocated to his account as of a date in such taxable year. An 
individual is also an active participant in a taxable year in such plans 
if an employer contribution is added to the participant's account in 
such taxable year. A contribution is added to a participant's account as 
of the later of the following two dates: the date the contribution is 
made or the date as of which it is allocated. Thus, if a contribution is 
made in an individual's taxable year 2 and allocated as of a date in 
individual's taxable year 1, the later of the relevant dates is the date 
the contribution is made. Consequently, the individual is an active 
participant in year 2 but not in year 1 as a result of that 
contribution.
    (2) Special rule. An individual is not an active participant for a 
particular taxable year by reason of a contribution made in such year 
allocated to a previous year if such individual was an active 
participant in such previous year by reason of a prior contribution that 
was allocated as of a date in such previous year.
    (e) Employee contributions. If an employee makes a voluntary or 
mandatory contribution to a plan described in paragraphs (b), (c), or 
(d) of this section, such employee is an active participant in the plan 
for the taxable year in which such contribution is made.
    (f) Certain individuals not active participants. For purposes of 
this section, an individual is not an active participant under a plan 
for any taxable year of such individual for which such individual 
elects, pursuant to the plan, not to participate in such plan.
    (g) Retirement savings for married individuals. The provisions of 
this section apply in determining whether an individual or his spouse is 
an active participant in a plan for purposes of section 220 (relating to 
retirement savings for certain married individuals).
    (h) Examples. The provisions of this section may be illustrated by 
the following examples:

    Example 1. The X Corporation maintains a defined benefit plan which 
has the following rules on participation and accrual of benefits. Each 
employee who has attained the age of 25 or has completed one year of 
service is a participant in the plan. The plan further provides that 
each participant shall receive upon retirement $12 per month for each 
year of service in which the employee completes 1,000 hours of service. 
The plan year is the calendar year. B, a calendar-year taxpayer, enters 
the plan on January 2, 1980, when he is 27 years of age. Since B has 
attained the age of 25, he is a participant in the plan. However, B 
completes less than 1,000 hours of

[[Page 384]]

service in 1980 and 1981. Although B is not accruing any benefits under 
the plan in 1980 and 1981, he is an active participant under section 
219(b)(2) because he is a participant in the plan. Thus, B cannot make 
deductible contributions to an individual retirement arrangement for his 
taxable years of 1980 and 1981.
    Example 2. The Y Corporation maintains a profit-sharing plan for its 
employees. The plan year of the plan is the calendar year. C is a 
calendar-year taxpayer and a participant in the plan. On June 30, 1980, 
the employer makes a contribution for 1980 which as allocated on July 
31, 1980. In 1981 the employer makes a second contribution for 1980, 
allocated as of December 31, 1980. Under the general rule stated in 
Sec. 1.219-2(d)(1), C is an active participant in 1980. Under the 
special rule stated in Sec. 1.219-2(d)(2), however, C is not an active 
participant in 1981 by reason of that contribution made in 1981.

    (i) Effective date. The provisions set forth in this section are 
effective for taxable years beginning after December 31, 1978.

[T.D. 7714, 45 FR 52789, Aug. 8, 1980]

                   Special Deductions for Corporations