The proportion of an annuity payment from a qualified pension plan that is determined to have come from employee contributions is taxed at ordinary income rates.

Qualified Pension Plan

A retirement plan that meets requirements established by the Internal Revenue Code, offering tax advantages such as tax-deferred growth on earnings.

Ordinary Income Rates

Tax rates applicable to an individual's ordinary income, including wages, salaries, commissions, and income from interest or dividends, which are taxed at progressive rates.

Employee Contributions

Employee Contributions are amounts set aside from an individual's earnings into retirement plans, benefit plans, or taxes, often deducted directly from their paycheck.