Annual Addition Limit or Annual Benefit Limit
Definition
The annual addition limit is the maximum amount that may be added to a defined contribution plan on behalf of a participant for any plan year.The maximum amount is the lesser of the following: (a). 100% of the participants compensation for the year or ( b). The dollar limit that is in effect for the year
The dollar limits for 2002 to 2007 are as follows:
Year |
2008 |
2007 |
2006 |
2005 |
2004 |
2003 |
2002 |
Limit |
$46,000 |
45,000 |
44,000 |
42,000 |
41,000 |
40,000 |
40,000 |
The annual benefit limit for defined benefit plans is the lesser of:
A)
100% of the participant's average compensation for his or her highest 3 consecutive calendar years
B) The dollar limit that is in effect for the year
Year |
2008 |
2007 |
2006 |
2005 |
2004 |
2003 |
2002 |
Limit |
$185,000 |
180,000 |
175,000 |
170,000 |
165,000 |
160,000 |
160,000 |
Referring Cite
IRC § 415(b)(1)(A) and IRC § 415(c)(1)(A), Treas Reg §1.415(c)-1
Additional Helpful Information
- The term annual additions generally means the sum for any year of employer
contributions, employee contributions, and forfeitures.
- For plans that include salary deferral features, individuals who are at least age 50 by the end of the year may make catch-up contributions in addition to the annual addition limit, if catch-up contributions are permitted under the plan.
- Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Actuarial assumptions and computations are required to figure these contributions. Generally, you will need continuing professional help to have a defined benefit plan.
- Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. Forfeitures must be used instead to reduce employer contributions.
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