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What does it mean by additional contributions. Is this when an employee contributes to a retirement plan and the employer matches the contribution?

 
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1 Reply
BillM223
Employee Tax Expert

What does it mean by additional contributions. Is this when an employee contributes to a retirement plan and the employer matches the contribution?

No.

 

It probably refers to the situation when you make additional after-tax contributions to your retirement plan. 

 

Because these dollars are after-tax, they are not taxed when they are returned to you as pension payments. This means, though, that you must keep track of these after-tax contributions, which are referred to as "basis".

 

Note that many taxpayers make these payments (so don't feel that you have to), so they have no "basis" in their retirement plan.. This also means that pension distributions, when these come, are 100% taxable.

 

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