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.

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  1. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  2. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  3. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  4. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  5. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>
  6. Are catch-up contributions included in actual deferral percentage (ADP) testing?

    Though the Internal Revenue Service (IRS) carefully scrutinizes the contributions of highly compensated employees (HCEs) ... Read Full Answer >>

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