Annual Addition

DEFINITION of 'Annual Addition'

The total dollar amount contributed in a given year to a participant's retirement account under a defined-contribution plan. An annual addition is the sum of employer contributions, employee contributions and forfeitures in a particular year. The annual addition is subject to a maximum limit. This annual addition limit is the lesser of 100% of the participant's compensation for the year or the dollar limit in effect for the year. The annual addition dollar limit was fixed at $49,000 for each year from 2009 to 2011.

BREAKING DOWN 'Annual Addition'

Certain amounts credited to a participant's plan are not considered as annual additions. These include "catch-up" contributions, rollover contributions and loan repayments. In addition, employee contributions transferred from a qualified plan to a defined contribution plan do not count towards the annual addition.

RELATED TERMS
  1. Employee Contribution Plan

    A company-sponsored retirement plan where employees may elect ...
  2. Defined-Contribution Plan

    A retirement plan in which a certain amount or percentage of ...
  3. Matching Contribution

    A type of contribution an employer chooses to make to his or ...
  4. Retirement Contribution

    A monetary contribution to a retirement plan. Retirement contributions ...
  5. Additional Voluntary Contribution ...

    An extra allocation of funds to a retirement savings account ...
  6. Nonelective Contribution

    A type of contribution an employer chooses to make to each of ...
Related Articles
  1. Retirement

    401(k) Contribution Limits in 2016

    Find out what the contribution limits are for 401(k) retirement savings plans in 2016, including individual, employer and aggregate limits.
  2. Retirement

    Why are 401(k) contributions limited?

    Find out why contributions to 401(k) retirement plans are limited, including what the current contribution limits are and how limits encourage participation.
  3. Retirement

    It’s Never Too Late to Contribute to Your 401(k)

    Find out why it is never the wrong time to start contributing to a 401(k), even in your late 30s, 40s or 50s; discover how to maximize your savings at any age.
  4. Retirement

    457 Plan Contribution Limits in 2016

    Learn about the 2016 contribution limits for 457(b) retirement plans and how you may be eligible to make catch-up contributions up to twice the annual limit.
  5. Retirement

    How 401(k) Matching Works

    Find out how employer matching of your 401(k) contributions works, including how employer contributions are calculated and annual contribution limits.
  6. Retirement

    Retirement Planning for the Self-Employed

    How to select a qualified retirement plan if you are self-employed and have no employees.
  7. Retirement

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  8. Retirement

    What's a Defined Contribution Plan?

    A defined contribution plan is a company retirement plan that specifies the amount of money contributed to it.
  9. Personal Finance

    529 Plan Contribution Limits in 2016

    Learn about the contribution and account balance limits on 529 plan accounts and discover how these contribution limits differ in each state.
  10. Financial Advisor

    The Deadline for Catch-Up Contributions: April 18

    Those who want to maximize their retirement plan contributions can still make a prior-year contribution for 2015. Don't miss the April 18th deadline.
RELATED FAQS
  1. Can I make a contribution to my Roth IRA before I get paid quarterly?

  2. What are the Registered Retirement Savings Plan (RRSP) contribution limits?

    Review annual contribution limits for Registered Retirement Savings Plans and figure out how much you can invest for your ... Read Answer >>
  3. Can catch-up contributions be matched?

    Learn about how the specific terms of your retirement savings plan dictate how and when your employer may match your catch-up ... Read Answer >>
  4. Are catch-up contributions included in the 415 limit?

    Learn about IRC section 415 limit and why catch-up contributions are not included. Learn about current 401(k) contribution ... Read Answer >>
  5. What are qualified retirement plan types?

    Understand the different types of qualified retirement plans and what they mean in terms of employee and employer contribution ... Read Answer >>
  6. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Find out why contributions to IRA, Roth IRA and 401(k) retirement savings plans are limited by the IRS, including what the ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center