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needed to provide those benefits and those amounts are contributed to the plan. Defined benefit plans include pen- sion plans and annuity plans. Example. Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Nick leaves Company B on December 31, 2017. Because Nick is eligible to partici- pate in the plan for its year ending June 30, 2018, he is covered by the plan for his 2018 tax year. No vested interest. If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Situations in Which You Aren’t Covered Unless you are covered by another employer plan, you aren’t covered by an employer plan if you are in one of the situations described below. Social security or railroad retirement. Coverage under social security or railroad retirement isn’t coverage under an employer retirement plan. Benefits from previous employer's plan. If you receive retirement benefits from a previous employer's plan, you aren’t covered by that plan. Reservists. If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. You aren’t covered by the plan if both of the following conditions are met. 1. The plan you participate in is established for its em- ployees by: a. The United States, b. A state or political subdivision of a state, or c. An instrumentality of either (a) or (b) above. 2. You didn’t serve more than 90 days on active duty during the year (not counting duty for training). Volunteer firefighters. If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. You aren’t covered by the plan if both of the following conditions are met. 1. The plan you participate in is established for its em- ployees by: a. The United States, b. A state or political subdivision of a state, or c. An instrumentality of either (a) or (b) above. 2. Your accrued retirement benefits at the beginning of the year won’t provide more than $1,800 per year at retirement. Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for con- tributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Your deduction is also affected by how much income you had and by your filing status. Your deduction may also be affected by so- cial security benefits you received. Reduced or no deduction. If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduc- tion at all, depending on your income and your filing sta- tus. Your deduction begins to decrease (phase out) when your income rises above a certain amount and is elimina- ted altogether when it reaches a higher amount. These amounts vary depending on your filing status. To determine if your deduction is subject to the phase- out, you must determine your modified AGI and your filing status, as explained later under Deduction Phaseout. Once you have determined your modified AGI and your fil- ing status, you can use Table 1-2 or Table 1-3 to deter- mine if the phaseout applies. Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, complete the worksheets in Appendix B of this publi- cation if, for the year, all of the following apply. • You received social security benefits. • You received taxable compensation. • Contributions were made to your traditional IRA. • You or your spouse were covered by an employer re- tirement plan. Use the worksheets in Appendix B to figure your IRA de- duction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Appendix B includes an example with filled-in worksheets to assist you. Deduction Phaseout The amount of any reduction in the limit on your IRA de- duction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Covered by a retirement plan. If you are covered by an employer retirement plan and you didn’t receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. If your spouse is covered. If you aren’t covered by an employer retirement plan, but your spouse is, and you didn’t receive any social security benefits, your IRA de- duction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Ta- ble 1-3. Page 12 Chapter 1 Traditional IRAs