Early withdrawal penalty on earnings attributable to after-tax contrib

[Guest Pat Metallic]

Upon distribution of after-tax contributions, a participant is taxed only on the income. Is the income subject to the 10% early withdrawal penalty?

[Michael Devault]

Yes, it is. The penalty is imposed only on the amount of the distribution that is included in income, which would include employer contributions, employee contributions made before tax, and all earnings.

Hope this helps.