Section 415(c) annual additions, explained.
The defined contribution annual additions limit for 2026, what counts toward it, two worked examples, the usual causes of an excess and how to build the check into operations.
What Section 415(c) limits
IRC Section 415(c) caps the annual additions that can be allocated to a participant's accounts in all defined contribution plans of the same employer for a limitation year. The cap is the lesser of 100% of the participant's compensation for the year, or a dollar limit indexed each year: $72,000 for 2026 and $70,000 for 2025 (IRS Notice 2025-67).
The limit is per participant and per employer, not per plan. Plans of the same controlled group are aggregated, using the modified more-than-50% control test of Section 415(h).
What counts as an annual addition
| Counts toward 415(c) | Does not count |
|---|---|
| Elective deferrals, pre-tax and Roth (excluding catch-ups) | Age 50+ catch-up contributions under Section 414(v) |
| Employer matching contributions | Rollover contributions |
| Employer nonelective (profit sharing) contributions | Loan repayments |
| Forfeitures allocated to the participant | Investment earnings |
| Employee after-tax contributions | Restorative payments and certain corrective contributions, as defined in the regulations |
Compensation for this purpose is Section 415 compensation as defined by the plan, which is also capped by the Section 401(a)(17) compensation limit ($360,000 for 2026).
Worked examples (2026, calendar-year limitation year)
| Participant A | Participant B | |
|---|---|---|
| Compensation | $60,000 | $300,000 |
| Elective deferrals (excluding catch-up) | $24,500 | $24,500 |
| Employer match | $6,000 | $12,000 |
| Profit sharing | $35,000 | $40,000 |
| Total annual additions | $65,500 | $76,500 |
| 415(c) limit: lesser of compensation and $72,000 | $60,000 | $72,000 |
| Excess | $5,500 | $4,500 |
Participant A shows why the compensation cap matters: lower-paid owners and employees in plans with large profit sharing allocations can hit the 100%-of-pay limit well below the dollar limit. If Participant B were 50 or older, an $8,000 catch-up would sit on top of the $72,000 and not count.
Run your own scenario in the 415(c) annual additions checker.
Common causes of excess annual additions
- Profit sharing allocations calculated without checking each participant's other additions.
- Participants in two plans of the same controlled group that are tested separately.
- Compensation that is lower than expected, for example a mid-year hire or a part-year owner.
- Forfeiture allocations made after the other contributions.
- A short limitation year, where the dollar limit is prorated. See the IRS issue snapshot.
How excesses are corrected
The plan document and the IRS Employee Plans Compliance Resolution System (EPCRS) set out how excess annual additions are corrected. Correction methods can include distributing elective deferrals (with earnings) and placing excess employer amounts in a suspense account or forfeiting them. The right method depends on the plan's terms and when the excess is found. The IRS page on fixing a failure to limit contributions for a participant is the starting point.
The cheapest correction is the one you never need: check additions per participant before an employer contribution is allocated, not after.
Building 415(c) into operations
- Track annual additions per participant across all plans of the controlled group, throughout the year.
- Check projected additions before allocating profit sharing or true-up matches.
- Flag participants where compensation, not the dollar limit, is the binding cap.
- Keep the inputs, the limit used and the reviewer's decision with each flag.
In the KinetiPlan pilot build, the testing suite checks annual additions against a $72,000 default cap and flags participants over the limit as action required for qualified staff.
References
- IRS Notice 2025-67: 2026 amounts relating to retirement plans
- IRS: COLA increases for dollar limitations on benefits and contributions
- 26 CFR 1.415(c)-1: limitations for defined contribution plans (eCFR)
- IRS: Fixing common plan mistakes, failure to limit contributions for a participant
- IRS issue snapshot: 415(c) dollar limitations in a short limitation year
- KinetiPlan: 2026 401(k) limits and compliance deadlines
General information for plan professionals, not legal, tax or ERISA advice. Plan documents, elections and later IRS or DOL guidance can change how a rule applies to a specific plan. Dollar figures are for the years stated; check the current year before relying on them.
Common questions
What is the 415(c) limit for 2026?
The lesser of 100% of the participant's compensation or $72,000, per IRS Notice 2025-67. It was $70,000 for 2025.
Do catch-up contributions count toward 415(c)?
No. Age 50 and over catch-up contributions under Section 414(v) are not counted as annual additions.
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