Nancy's company allows employees to make additional aftertax contributions
(many employers do), which she has done.
Employee deferrals to the Roth 401(k) are after-tax contributions and governed by the rules applicable to aftertax contributions
in an employer plan.
In addition individuals generally will be able to move aftertax contributions
from their pension plan into a traditional IRA.
Most notably, the 1997 Tax Relief Act created the Roth individual retirement account, through which aftertax contributions
are accumulated and can be withdrawn tax-free at retirement age.
However, both Paul and Lois can make full aftertax contributions
to a traditional IRA for 2012.
The rate of matching contributions cannot increase as the rate of an employee's aftertax contributions
Example: Betty's Roth IRA has a balance of $15,650 in 2004, representing $12,000 in aftertax contributions and $3,650 in, accumulated earnings.
Because Roth IRA withdrawals are not taxed under the normal annuity rules, taxpayers can recover aftertax contributions first to pay college costs and wait to distribute earnings tax-free after retirement.
Under the conventional exclusion ratio rules, the taxable (and nontaxable) portions of an annuity distribution are determined as follows: Conventional Aftertax contributions
exclusion = annual benefit x life ratio expectancy from Treasury regulations section 1.72-9