After-tax contribution

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After-Tax Contribution

A contribution made to a retirement plan with money one has left over after paying taxes. That is, when one makes after-tax contributions to a retirement plan, one has already paid taxes on the contribution. As a result, one does not pay taxes on the withdrawals on the plan made after retirement. After tax contributions are made on Roth IRAs and Roth 401(k)s. See also: Pre-Tax Contributions.

After-tax contribution.

An after-tax contribution is money you put into your 401(k) or other employer sponsored retirement savings plan either instead of or in addition to your pretax contribution.

You make an after-tax contribution if you've chosen to participate in a Roth 401(k) or similar tax-free plan rather than a traditional tax-deferred 401(k).

However, if you make excess deferrals, any earnings on the after-tax amount accumulate tax deferred. The disadvantage is that figuring the tax that's due on your required distributions may be more complicated than if you had made only pretax contributions.

References in periodicals archive ?
These are also referred to as voluntary after-tax contributions. VACs may offer you the opportunity to add an additional $10,000 or even $20,000 to your own account depending on your company contributions.
Wait, our plan already allows for Roth deferrals, isn't that the same as after-tax contributions? While Roth and After-Tax contributions are both made by the employee and are taxed in the year they are made, how the earnings on the two contribution types are handled is very different.
That $33,000difference is the amount that an employee could make in after-tax contributions! If the employee is 50 years of age or older, they can still make their catch-up contribution of $6,000, which does not count against any of the previously mentioned limits.
High-income wage earners should consider after-tax contributions to their qualified plan if their employer plan allows for it.
Prudential worked with Washington, D.C., nonprofit organization Prosperity Now to design a potential solution using payroll deductions to fund after-tax contributions. Prudential Retirement(r) is now offering this feature to plan sponsors as part of their holistic workplace financial wellness package.
* Option 1--Employee after-tax contributions. Employers are not required to help with the employees' HSAs and may choose not to.
The eligible client transfers the employer securities held in his or her 401(k) into a taxable account, realizing the gain on the sale of the employer securities when those securities are sold, while the remaining assets can be transferred into an IRA or Roth IRA, depending upon whether they consist of pre-tax or after-tax contributions. Importantly, the client must be careful to capture all employer contributions that were made to the account throughout the year, keeping in mind that some contributions may be made in the following year.
In response to what it says is interest from employers regarding its own student loan assistance program, Fidelity Investments is launching a Student Debt Employer Contribution program, aimed at allowing employers to make after-tax contributions to pay down their employees' debt.
The paper continues: "By contrast, distributions from defined benefit plans are taxable except for the portion that represents the recovery of an employee's basis-that is, his or her after-tax contributions to the plan.
Tax rules require an IRA's after-tax contributions to be compared with the year-end IRA balance, plus distributions during the year, to calculate the ratio of pre-tax and after-tax dollars involved in a distribution.
The portion of the distribution or transfer that is not treated as a return of after-tax contributions to the traditional IRA is added to gross income in the year of the conversion and thus is subject to income tax but not the 10% additional tax under Sec.
401 (k) plan balance, of which $100,000 is attributable to after-tax contributions (not designated Roth account contributions).