Final answer:
Box 12 code BB on a W-2 form indicates contributions to a Roth 403(b) retirement savings account, which offers after-tax contributions but tax-free growth and withdrawals.
Step-by-step explanation:
On a W-2 form, Box 12 code BB indicates 'Designated Roth contributions under a section 403(b) salary reduction agreement.' This signifies that the amount shown is the employee's contributions to a retirement savings account, specifically to a Roth 403(b). Unlike traditional pre-tax 403(b) contributions, Roth 403(b) contributions are made with after-tax dollars but offer tax-free growth and tax-free withdrawals in retirement for qualified distributions. The benefits of this type of contribution include tax-free growth and the ability to withdraw funds tax-free if certain conditions are met. Employers may offer this as a part retirement and savings benefits in their compensation package.