After-tax contribution

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 ?
Using two examples, the CCA discusses a plan in which an employer offers all employees enrollment in a self-funded health plan, for which the employees pay a small, after-tax contribution to participate.
The Roth IRA after-tax contribution limit for 2010 is $5,000, plus a catch-up contribution of $1,000 for those who have attained age 50 or higher.
Such after-tax contribution provisions must meet the administratively complex nondiscrimination rules of Code section 401(m).
In contrast, assume the investment vehicle is one where the return is fully currently taxable and where PV is an after-tax contribution.
Results for the fiscal 2004 quarter included a negative impact of $50 million from the southern California labor strike as well as a $5 million after-tax contribution to two union multiemployer health and welfare plans in northern California.
Therefore, the after-tax contribution feature of the Roth would allow an individual to save more money toward retirement, other things being equal.
The numerator of the fraction, which may be called the employee's investment, represented the retiree's after-tax contribution to the plan.
Split 401(k) rollovers maximize after-tax contribution value.
For 403(b) plans with existing after-tax contributions, many plan sponsors have discontinued the after-tax contribution sources once a Roth feature was added.
While deferring wages up to this contribution limit is the goal for some clients, in order to truly maximize the 401(k) option, others have sought to take advantage of the after-tax contribution limit as a means to eventually fund a Roth IRA.