The After-Tax “50% Additional” Money in Your NYPD Pension
Already-taxed money in a Tier 2 account, and where it can go

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What 50% Additional is

Tier 2 members pay a contribution rate set by their age when they were appointed, and the City picks up part of it, which the booklet calls ITHP (Tier 2 booklet, June 2026, p.8). On top of that, the booklet describes two voluntary programs. You can waive ITHP and pay the whole rate into your own account. Or you can join 50% Additional and pay an extra half of your required rate: with a 7% rate, the extra is 3.5% (p.9).

The two are taxed differently on the way in. ITHP waiver contributions are tax deferred. 50% Additional is not. The booklet says the contribution is “made post-tax,” while the interest it earns in the account “is tax deferred” (p.9).

So the dollars you paid in under 50% Additional were taxed before they went in. The interest they earned wasn’t, and it’s taxed when it comes out. The IRS draws the same line for after-tax money in general: “Earnings associated with after-tax contributions are pretax amounts in your account.”

The booklet names one more after-tax source. It says contributions made on or after December 1, 1989 are not subject to federal tax under Internal Revenue Code section 414(h), 50% Additional aside. Before that date it was different: “Member contributions made before December 1, 1989, are subject to federal, state, and local taxation” (p.7).

Why it matters at retirement

At retirement, a Tier 2 member can take a final withdrawal from the Annuity Savings Fund. The booklet says it “can consist of both taxable and/or non-taxable funds” (p.12). In its section on reducing a shortage, it says choosing 50% Additional “may result in ASF funds that can be withdrawn tax-free at retirement” (p.14). Note the word “may.” How much of your own account is after-tax is a figure only the Fund holds.

50% Additional can also build an excess, money above your required amount, the same way an ITHP waiver does. What taking the excess, or more, does to your pension is covered in NYPD Final Withdrawal: Leave It, Take the Excess, or Take All.

Where after-tax money can go

IRS Notice 2014-54 lets one payout be split by tax type. If a distribution holds both pre-tax and after-tax money, the IRS says “you can roll over all your pretax amounts to a traditional IRA or retirement plan and all your after-tax amounts to a different destination, such as a Roth IRA.”

Moved to a Roth IRA, that after-tax money can grow tax-free, under the Roth IRA’s own conditions for tax-free withdrawals of the growth. Your tax professional can walk you through those conditions before you move anything.

There’s one limit: proportion. The IRS says that if an account holds both kinds, “any distribution will generally include a pro rata share of both,” and that the notice “doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account.” So you generally can’t take out only the after-tax money and leave the rest.

How the Fund applies that to an NYPD account, for example to a withdrawal of only your excess, isn’t in the booklet. Ask the Fund.

What to ask the Fund, in writing

• How much of my Annuity Savings Fund is after-tax money, from 50% Additional and from anything paid in before December 1, 1989?
• If I take a final withdrawal, or only my excess, how much of it is after-tax?
• Will you split a direct rollover so the pre-tax part goes to one account and the after-tax part to another?
• How will the 1099-R show the after-tax amount?

Then take the answers to your tax professional. The booklet’s own word is “may,” and your split is your own.

Common questions

Can 50% Additional money go to a Roth IRA?

The after-tax part can. IRS rules let the after-tax money in a payout be rolled to a Roth IRA, while the interest it earned is pre-tax and goes to a traditional IRA or is taxed. Inside the Fund it’s after-tax money in your pension account.

Did contributions before 1989 go in after tax?

Yes. The booklet says member contributions made before December 1, 1989 are subject to federal, state and local tax, and that contributions made on or after that date are not subject to federal tax under section 414(h) (p.7). 50% Additional is the exception: it’s made after tax whenever it was paid in (p.9).

Can I take out only the after-tax money?

Generally not. The IRS says each plan distribution must include a proportional share of the pre-tax and after-tax amounts. Ask the Fund how that works for your account.

Is this a Tier 3 question?

No. The Annuity Savings Fund, ITHP and 50% Additional are Tier 2 terms; the Tier 3 booklet doesn’t use them.

Retiring from the FDNY? Firefighters are in a separate pension fund. Run the FDNY pension calculator or get the free FDNY Pension Book.

Working with us: Sirmium Capital works with NYPD members and retirees. What we do, how the firm is paid and how to start.