Before-tax contributions

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Before-tax contributions

The portion of an employee's salary contributed to a retirement plan before federal income taxes are deducted; this reduces the individual's gross income for federal tax purposes.

Before-Tax Contributions

Contributions made to a retirement plan with taxable withdrawals. That is, when one makes before-tax contributions to a retirement plan, one does not pay taxes on the contributions in the year they are made, but defers taxation until one begins to make withdrawals from the plan. One makes before-tax contributions to traditional IRAs and most 401(k)s. See also: After-tax contributions.
References in periodicals archive ?
During the Tuesday briefing, Schumer said the Senate Democratic plan would lift the cap on pre-tax contributions for 401(k)s, create a new tax credit for companies who will match 401(k) contributions, and create a new auto-IRA program "for the one half of American workers under age 65" who don't have access to an employer-sponsored retirement plan.
Some plans allow for pre-tax contributions, Roth contributions and post-tax contributions or a combination of these, and some plans allow for in-plan conversion of funds between the accounts.
For example, if their marginal tax rate is 25% and they contribute $1,000, they would save $250 in taxes, making the actual cost of pre-tax contributions effectively $750.
These clients should ensure that they are taking all steps possible to reduce AGI -- such as maxing out pre-tax contributions to retirement accounts, health savings vehicles and dependent care programs.
And the limit on pre-tax contributions to flexible spending accounts are now capped at $2,500 annually.
It ensures that highly-compensated employees can maximize their pre-tax contributions to the plan; and
Adding a cash balance plan allows them to rapidly accelerate savings with pre-tax contributions as high as $100,000 to $220,000, depending on their age.
The IRS said the changes immediately allow employers with cafeteria plans--plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits--to permit employees to begin making pre-tax contributions to pay for the expanded benefit.
The IRS issued guidance announcing the changes immediately allow employers with cafeteria plans to permit employees to begin making pre-tax contributions to pay for this expanded benefit.
In 2009 and 2010 pre-tax contributions are limited to the lesser of $49,000 or 25 percent of the first $245,000 of net earned income (with sole proprietorships and partnerships the owners are effectively limited to 20 percent).
In 2010 pre-tax contributions are limited to the lesser of $49,000 or 25% of the first $245,000 of net earned income (with sole proprietorships and partnerships, the owners are effectively limited to 20%).
One option would be to allow pre-tax contributions to employee-pay-all VEBAs for all workers.