Saver's Tax Credit

A friend under tier 2011 wants to know if their 4% contribution towards retirement is eligible for the federal saver's tax credit. Some places on the web seem to call the employee contribution a 457 (deferred comp) plan. No where else is it referred to by any plan name (IRA, 403B, 401K) that would clarify what it is. To make it more confusing, the contribution is in box 14 of their W-2 with code EE after it. If it was in box 12, code EE would mean it was a 457 plan and would be saver's credit eligible, but there is no definition of what this means in box 14. Did they make a mistake?

No, the 4% employee contributions made by members of the MSEP 2011 or the Judicial Plan 2011 to MOSERS do not qualify for the retirement Savers Credit because these contributions are mandatory contributions. The MOSERS defined benefit plan is classified as a qualified retirement plan. However, only voluntary contributions to a qualified retirement plan are eligible for the retirement savers credit. The 4% contributions are made on a pre-tax basis and used to help pay the cost of future retirement benefits. On the W-2 form, contributions to the MOSERS defined benefit plan should be listed in Box 14, but there are no standard codes to indicate the type of contribution. It is optional for the employer to report these contributions on the W-2.

The MO Deferred Comp Plan is a voluntary governmental 457(b) plan designed to help employees save additional income to supplement their defined benefit pension and social security benefits in retirement. The deferred compensation plan provides a convenient way to save extra money for retirement through payroll deduction. Voluntary contributions to MO Deferred Comp, or another governmental 457(b) plan, are eligible for the Saver’s Credit. Keep in mind, the credit is for low- to moderate-income taxpayers and calculated using their adjusted gross income (AGI) and filing status. Learn more about the Saver’s Credit on the IRS website. On the W-2 form, contributions to MO Deferred Comp, a 457(b) plan, are listed in Box 12. A code of G indicates a 457(b) plan and a code of EE indicates designated Roth contributions under a governmental section 457(b) plan.

Please see the instructions for IRS Form 8880 for more information concerning this credit.