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. Defined-Contribution Plan

    A defined-contribution plan is a retirement plan in which a certain ...
  2. Matching Contribution

    A type of contribution an employer chooses to make to his or ...
  3. 403(b) Plan

    A 403(b) is a retirement plan for certain employees of public ...
  4. Money-Purchase Pension Plan

    A pension plan to which employers and employees make contributions ...
  5. Withdrawal Benefits

    The rights of an employee who has a qualified pension plan to ...
  6. National Insurance Contributions ...

    National Insurance Contributions are payments made by employees ...
Related Articles
  1. Retirement

    401(k) Contribution Limits in 2017-18

    Find out what the contribution limits are for 401(k) retirement savings plans in 2017-18, 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

    How to Save More for Your Retirement

    Be sure you know all the tax-advantaged ways in which you can save more for retirement.
  4. 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.
  5. Retirement

    How Can You Make the Most of Your 401(k)?

    Make the most of your 401(k) plan by contributing early and taking advantage of employer matches.
  6. Retirement

    Saving For Retirement When You're Not Working

    Lack of full-time employment can make saving for retirement more difficult, but there are some vehicles that can help.
RELATED FAQS
  1. 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 >>
Hot Definitions
  1. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  2. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  3. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  4. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  5. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  6. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
Trading Center