What defines a partly taxable pension?

A partly taxable pension is best defined as one that consists of contributions from both the employer and the employee. In this scenario, when an employee contributes to their pension, those contributions might have been made with after-tax dollars, while the employer’s contributions are typically made with pre-tax dollars. When distributions are taken from such a pension plan, only a portion is considered taxable. This is because the employee’s after-tax contributions have already been taxed and therefore do not require taxing again upon distribution, while the employer's contributions, likely being pre-tax, will be subject to taxation when withdrawn.

The other answer choices do not adequately represent the structure of a partly taxable pension. Options that mention pensions with solely employee contributions or without any employee contributions miss the point that a mix of contributions determines the taxable nature of distributions. Additionally, suggesting that certain pensions do not require tax reporting ignores the essential tax implications involved in pension distributions, which must be reported appropriately based on their tax status. Thus, only a pension plan with contributions from both employer and employee aligns with the characteristics of a partly taxable pension.