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February 15, 2009

Tax Deferral (or tax-deferred)



Treatment applied to earnings that accrue in qualified plans, IRAs, 403(b) and 457 plans, as well as some insurance and annuity products. Earnings that accrue in these accounts are not taxed until they are withdrawn from the account or retirement plan, i.e. taxation of these amounts are deferred until they are withdrawn. Tax deferral treatment also applies to pre-tax or deductible contributions to these plans.

Referring Cite

IRC§401(a), IRC§408, IRC§403

Additional Helpful Information

  1. Eligible employer contributions to qualified plans, SEP and SIMPLE IRAs, and 403(b) plans are deductible by the employer-if applicable-, and are not taxed to the participant until withdrawn from the retirement plan.
  2. Participants are permitted to make salary-deferral contributions to certain plans, including 401(k), 403(b), SIMPLE IRAs, 457(b) plans by reducing their taxable compensation. These amounts are taxed when withdrawn from the plan.
  3. Taxpayers may make deductible contributions to traditional IRAs, if eligible

Earnings on these amounts, including earnings on after-tax or nondeductible contributions to these plans (where nondeductible contributions are permitted) accrue on a tax-deferred basis


Keep Learning

Applicable RMD Age

Applicable RMD Age The first year for which an IRA owner or plan participant must begin to take RMDs from their tax-deferred retirement account. RMDs

SIMPLE 401(k) Plan

Definition A SIMPLE 401(k) plan is a 401(k) plan established by a small business for it’s employees. Earnings accrue on a tax-deferred basis and distributions

Required Minimum Distribution (RMD)

Definition The minimum amount that must be withdrawn from retirement accounts, including qualified plans, 403(b) accounts, 457(b) accounts or IRAs, each year.  For retirement account

Required beginning date (RBD)

Definition The date by which a retirement account owner must begin distributing required minimum distribution (RMD) amounts from a Traditional,  SEP or SIMPLE IRA, a

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