Annual Addition

AAA

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.

INVESTOPEDIA EXPLAINS '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. Elective-Deferral Contribution

    A contribution arrangement of an employer-sponsored retirement ...
  2. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  3. Matching Contribution

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

    A plan that meets requirements of the Internal Revenue Code and ...
  5. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
  6. Defined-Contribution Plan

    A retirement plan in which a certain amount or percentage of ...
Related Articles
  1. New Retirement Plan Limits For 2011
    Taxes

    New Retirement Plan Limits For 2011

  2. Common Questions About Retirement Plans ...
    Taxes

    Common Questions About Retirement Plans ...

  3. The 401(k) and Qualified Plans Tutorial
    Taxes

    The 401(k) and Qualified Plans Tutorial

  4. Want To Know How To Save For Retirement? ...
    Retirement

    Want To Know How To Save For Retirement? ...

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center