Question

In which of the following retirement plans is a participant NOT considered an active participant for determining the deductibility of traditional IRA contributions?

1. Roth IRA
2. 401(k) plan
3. SEP-IRA
4. SIMPLE IRA

Answer 1

A participant is not considered an active participant for determining the deductibility of traditional IRA contributions in a Roth IRA, as it is funded with after-tax dollars, unlike employer-sponsored plans such as 401(k)s, SEP-IRAs, and SIMPLE IRAs.

Step-by-step explanation:

In determining the deductibility of traditional IRA contributions, a participant is not considered an active participant in a Roth IRA. Roth IRAs are individual retirement accounts where contributions are made with after-tax dollars and thus do not affect the deductibility of traditional IRA contributions. On the other hand, plans like the 401(k), SEP-IRA, and SIMPLE IRA are employer-sponsored plans that provide certain tax advantages, and participants in these plans are generally considered active participants for purposes of determining the deductibility of traditional IRA contributions.