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. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  2. Elective-Deferral Contribution

    A contribution arrangement of an employer-sponsored retirement ...
  3. Matching Contribution

    A type of contribution an employer chooses to make to his or ...
  4. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  5. Profit-Sharing Plan

    A plan that gives employees a share in the profits of the company. ...
  6. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
Related Articles
  1. Taxes

    New Retirement Plan Limits For 2011

    New changes to the law can have a huge impact on your nest egg.
  2. Taxes

    Common Questions About Retirement Plans

    We offer some solutions for the individual taxpayer as well as the small business owner.
  3. Taxes

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  4. Investing

    Why Cash is King When Markets are Volatile

    After the past several years, you might be addicted to equity. But when markets turn volatile, cash is the best option. Here's why.
  5. Professionals

    The Biggest Financial Mistakes Millennials Make

    Millennials are making financial mistakes that have the potential to cost them big over the course of their lives.
  6. Forex

    The Impact of 401(k) Outflows on Advisors

    The trend in the growth of assets in 401(k) plans has shifted as Baby Boomers retire, creating opportunities for financial advisors. Here's how.
  7. Professionals

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
  8. Professionals

    How Advisors Can Help Expectant Couples

    Bringing a child into the world makes parents more acutely aware of their finances. Here's how advisors can help expectant couples prepare.
  9. Retirement

    Why Millennials Should Invest in a Roth IRA

    Saving for retirement is important, and it's important to start early. A Roth IRA is a great option for low-earners just entering the workforce.
  10. Retirement

    How to Convert a Roth IRA to a Traditional IRA

    If the technicalities of converting a Roth IRA to a traditional IRA seem dauntingly complex, here are a few simple tips to guide you through the process.
RELATED FAQS
  1. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  2. How much will an employer generally contribute to a 401(a) plan?

    The amount an employer contributes to an employee's 401(a) retirement savings plan can vary from plan to plan. 401(a) plans ... Read Full Answer >>
  3. When can benefits be received from a provident fund?

    Like most retirement savings vehicles, participants in provident funds are eligible to receive benefits at retirement. However, ... Read Full Answer >>
  4. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
  5. What types of investments are allowed in a provident fund?

    Different provident funds have different investment rules and restrictions. The allowable investments in an Indian provident ... Read Full Answer >>
  6. How does a provident fund compare to U.S. Social Security?

    A provident fund shares many attributes of the U.S. Social Security program, including government sponsorship and set contribution ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  5. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  6. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!