Insurance Glossary


Employee's cost basis

In the United States, an amount that is subtracted from the total amount of a distribution to a pension plan participant, in order to determine the portion of the distribution that is subject to federal taxation. The cost basis is the amount on which an employee has already been taxed. It includes the amount of the nondeductible contributions made to the plan by the participant, any cost of plan-provided life insurance that was reported as taxable income by the participant, and other factors, including the amount of any employer contributions previously taxed as income to the participant.


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