What Is the 401(k) Annual Additions Limit?

The $24,500 employee deferral limit and the $72,000 annual-additions limit measure different things.

For 2026, the basic employee elective-deferral limit for most 401(k) participants is:

$24,500.^[1][2][3]

The Section 415(c) annual-additions ceiling is generally the lesser of:

• 100% of the participant's Section 415 compensation, or
• $72,000.^[1][2][3][4]

The first number limits a major contribution source.

The second measures the combined stack of contributions and forfeitures credited to the participant under the defined contribution plans that must be aggregated.^[1][4][5]

A participant can therefore be below the $24,500 deferral limit and still violate Section 415.

Or the participant can reach $24,500 of regular deferrals while remaining well below $72,000.

Key Takeaways

• The 2026 Section 415(c) dollar ceiling is $72,000.^[1][2][3]
• The participant-specific ceiling is generally capped by whichever is lower: $72,000 or 100% of applicable compensation.^[1][4]
• Regular pre-tax elective deferrals count toward annual additions.^[1][8]
• Regular designated Roth 401(k) deferrals also consume Section 415 room.
• Voluntary after-tax employee contributions count even though the employee has already paid income tax on the contributed pay.^[1][8]
• Employer match and nonelective/profit-sharing contributions count.^[1][8]
• Forfeitures allocated to the participant's account count.^[1][4][8]
• Qualifying Section 414(v) catch-up contributions generally sit outside the ordinary annual-additions calculation.^[1][8][10]
• For 2026, the general catch-up limit is $8,000; eligible participants ages 60 through 63 have a higher $11,250 limit.^[2][10]
• Rollover contributions and ordinary plan-loan repayments generally do not count as annual additions.^[8]
• Investment gains and losses change account value but do not consume annual-additions room.
• Multiple defined contribution plans sponsored by the same employer are generally combined for Section 415 testing.^[5]
• Related employers can also be treated as one employer, so opening another company does not automatically create another Section 415 ceiling.^[5][7][12]
• A participant entering halfway through a normal limitation year does not automatically receive half of the annual dollar limit.^[9]
• A genuinely short limitation year can require the dollar ceiling to be prorated.^[6][9]
• Excess annual additions are a plan qualification failure that can require distributions and forfeitures under the applicable correction method.^[8]

What Counts as an Annual Addition?

Treasury regulations define annual additions around amounts credited to a participant's account for the plan's limitation year.^[4]

For an ordinary 401(k), the practical list usually includes:

• employee elective deferrals
• employee voluntary after-tax contributions
• employer matching contributions
• employer nonelective contributions
• profit-sharing allocations
• allocated forfeitures.^[1][4][8]

The contribution source matters less than many participants expect.

Section 415 is designed to measure the amount added for the participant, not merely the amount the participant chose to contribute.

Regular Pre-Tax Deferrals Count

Assume a participant contributes:

$20,000

through regular pre-tax salary deferrals.

Those dollars use:

$20,000

of annual-additions room.^[1][8]

The fact that the contribution is excluded from current federal taxable income does not remove it from Section 415.

Tax treatment and annual-additions treatment answer different questions.

Regular Roth 401(k) Deferrals Count Too

A designated Roth deferral is still an elective deferral.

The participant pays current income tax on the compensation used for the Roth contribution, but the contribution still enters the defined contribution plan.

A participant cannot create extra Section 415 capacity by changing a regular deferral from:

pre-tax

to:

Roth.

Both consume annual-additions room unless an amount qualifies separately as a catch-up contribution.

Voluntary After-Tax Contributions Also Count

This is especially important for participants considering the strategy commonly called a:

mega backdoor Roth.

Suppose a participant contributes voluntary after-tax money beyond the regular elective-deferral amount.

Those contributions are not designated Roth elective deferrals.

They are also not free from Section 415.

Employee after-tax contributions are part of annual additions.^[1][8]

INV-047 explains the conversion strategy.

Section 415 determines how much room exists before the conversion question even matters.

Employer Match Uses the Same Stack

Start with:

Employee regular deferral:

$24,500

Employer contribution from the match:

$10,000

Annual additions so far:

$34,500

The participant has not exceeded the employee deferral limit.

The employer match does not reduce the participant's $24,500 Section 402(g) limit.

It does use Section 415 room.

Remaining room before considering the 100%-of-compensation test:

$72,000 − $34,500 = $37,500

Profit Sharing Can Use the Remaining Room

Now add a year-end employer profit-sharing allocation:

$20,000

Annual additions become:

$54,500

Remaining dollar-limit room:

$17,500

A participant who planned to make $37,500 of voluntary after-tax contributions based only on the deferral and match would now overshoot the annual-additions ceiling.

Year-end employer contributions are one reason after-tax contribution systems often need a buffer or coordinated limit.

Forfeiture Allocations Count

Suppose the plan reallocates forfeitures from former participants.

Participant receives an allocated forfeiture of:

$2,500

That allocation can count as an annual addition even though:

• the employee did not contribute it
• the employer did not deposit new cash for that specific allocation.^[1][4][8]

The relevant event is the amount allocated to the participant's account.

Unvested Employer Contributions Can Still Count

An employer contribution does not cease being an annual addition merely because it is not yet fully vested.

Section 415 measures the contribution credited to the participant for the limitation year.

Vesting answers a different question:

how much of the account the participant owns if employment ends.

A later forfeiture does not retroactively create new Section 415 room in the earlier limitation year merely because the participant failed to vest.

What Generally Does Not Count?

IRS identifies several common amounts outside annual additions.^[8]

Qualifying catch-up contributions

Section 414(v) catch-up amounts generally do not count against the ordinary Section 415(c) ceiling.^[1][8][10]

Rollover contributions

A participant moving money from another eligible retirement account into the plan generally does not use current-year annual-additions capacity.^[8]

Ordinary loan repayments

Repaying a plan loan generally does not create a new annual addition, subject to the special treatment IRS notes for above-market interest arrangements.^[8]

Investment earnings

Market appreciation, dividends, interest and other investment returns affect account value.

They are not employer or employee contributions or forfeiture allocations.

A participant's account can grow by far more than $72,000 during a strong market year without violating Section 415.

Restorative Payments Can Receive Different Treatment

Treasury regulations exclude qualifying restorative payments from annual additions under specified conditions.^[4][9]

A payment restoring a plan loss caused by certain fiduciary or legal issues is not necessarily treated like an ordinary employer contribution.

That exception is technical.

Do not label a contribution "restorative" merely because the employer wants to avoid the Section 415 limit.

The payment must fit the governing rule.

The 100%-of-Compensation Limit Can Be Lower Than $72,000

The $72,000 figure gets the attention.

For a lower-compensated participant, the other side of Section 415(c) can control.

Suppose Section 415 compensation is:

$50,000

The ordinary annual-additions ceiling is not $72,000.

It is generally:

$50,000

because the statute uses the lesser of:

• $72,000
• 100% of compensation.^[1][4]

Example: Compensation Controls

Section 415 compensation:

$48,000

Employee regular deferral:

$20,000

Employer contributions:

$28,000

Annual additions:

$48,000

The participant has reached the 100%-of-compensation ceiling even though the total is $24,000 below the 2026 dollar limit.

Another ordinary employer contribution would create a Section 415 issue unless another rule changes the calculation.

Catch-Up Contributions Sit Outside the Ordinary Ceiling

For a catch-up-eligible participant, a deferral that qualifies under Section 414(v) is generally not treated as an annual addition.^[1][8][10]

That allows total contributions credited for the year to exceed the ordinary $72,000 annual-additions figure.

For 2026:

• general catch-up limit: $8,000
• higher catch-up for eligible ages 60–63: $11,250.^[2][10]

These amounts are separate from the $72,000 defined contribution plan limit.

Example: Age 55 Participant

Assume:

Ordinary annual additions:

$72,000

Participant is age 55 and otherwise eligible for catch-up contributions.

General 2026 catch-up:

up to $8,000

Potential total contributions can therefore reach:

$80,000

when compensation, plan terms and the other applicable limits support the amounts.^[1][10]

That is not an $80,000 Section 415(c) limit.

It is:

$72,000 of annual additions + qualifying catch-up outside that calculation.

Example: Age 61 Participant

Consider an eligible participant who turns 61 during 2026.

Higher catch-up limit:

$11,250.^[10]

If ordinary annual additions already reach:

$72,000

potential total contributions can reach:

$83,250

subject to compensation and other applicable requirements.

Again, the Section 415 dollar limit itself remains $72,000.

Catch-Up Status Can Be Created by Hitting Section 415

A deferral does not have to be labeled catch-up at the moment payroll receives it.

For a catch-up-eligible participant, elective deferrals can be treated as catch-up contributions when they exceed an applicable limit, including the Section 415(c) limit, if the Section 414(v) requirements are satisfied.^[11]

That can prevent an apparent annual-additions excess from being a Section 415 violation.

Example: Section 415 Turns Part of the Deferral Into Catch-Up

Before final classification, a catch-up-eligible participant has:

• regular elective deferrals
• employer match
• profit sharing

Total credited amount:

$75,000

Ordinary Section 415 dollar ceiling:

$72,000

If $3,000 of the elective deferrals qualifies as catch-up under Section 414(v), the annual-additions calculation can treat that $3,000 outside the ordinary ceiling.^[11]

The participant can then have:

• $72,000 annual additions
• $3,000 catch-up

rather than a $3,000 Section 415 excess.

Roth Catch-Up Does Not Change the Section 415 Principle

Beginning in 2026, certain catch-up-eligible employees with prior-year FICA wages above the applicable threshold must make catch-up contributions as designated Roth contributions when the statutory rule applies.^[10]

For 2026, that prior-year wage threshold is:

$150,000.^[10]

The Roth tax treatment does not turn a qualifying catch-up back into an ordinary annual addition.

The contribution's status under Section 414(v) is what matters for the Section 415 exclusion.

INV-056 covers catch-up rules in more depth.

Three Limits Should Be Tracked Separately

For 2026, a participant can encounter:

Catch-up limits create another layer:

• $8,000 general
• $11,250 for eligible ages 60–63.^[2][10]

Combining these numbers into one field called:

401(k) max

is an invitation to payroll errors.

Section 402(g) Follows the Person

The basic elective-deferral limit generally applies to the individual's applicable elective deferrals across plans, including plans at unrelated employers.^[1]

Suppose an employee has two unrelated jobs.

Employer A 401(k) regular deferral:

$15,000

Employer B 401(k) regular deferral:

$12,000

Combined:

$27,000

Ignoring catch-up eligibility, the employee has exceeded the $24,500 basic 2026 deferral limit even though neither individual plan received more than $24,500.

Section 402(g) follows the person.

Section 415 Usually Follows the Employer Group

Section 415 combines annual additions across the employer's defined contribution arrangements and those of employers that must be treated as a single group.^[1][5][7]

That is a different aggregation rule.

Two genuinely unrelated employers can generally maintain separate Section 415-defined contribution plan limits for the same employee.

The employee still has one person-level Section 402(g) basic deferral limit across the applicable plans.

Example: Two Unrelated Employers

Employee works for:

Employer A

and:

Employer B

The businesses are genuinely unrelated for Section 415 purposes.

Each employer maintains its own 401(k).

Employer A plan annual additions:

$50,000

Employer B plan annual additions:

$40,000

The fact that the combined amount is:

$90,000

does not by itself establish a Section 415(c) violation because the employer-level plan aggregation rules can provide separate ceilings.^[5]

But the employee's elective deferrals across the two plans still have to satisfy Section 402(g).

A Second Company Does Not Automatically Create Another $72,000 Limit

Now assume the same individual owns two businesses that must be aggregated for Section 415.

Each business sponsors a defined contribution plan.

Plan A annual additions:

$45,000

Plan B annual additions:

$35,000

Combined:

$80,000

If the plans must be aggregated, the participant cannot claim a separate $72,000 ceiling for each plan.^[5][7]

The combined Section 415 analysis matters.

Section 415 Uses Its Own Related-Employer Control Rule

Section 415 does not simply copy every retirement-plan controlled-group threshold without modification.

Section 415(h) substitutes:

more than 50%

for the ordinary at least 80% language in specified controlled-group/common-control analysis.^[7][12]

That can make the Section 415 employer group broader than a sponsor expects.

A business owner should not assume:

"These companies are below 80%, so Section 415 aggregation is impossible."

The Section 415-specific control rules need to be checked.

Affiliated Service Groups Can Aggregate Plans Too

INV-091 explains affiliated service groups.

Section 415's regulations treat applicable affiliated-service-group employers together for plan aggregation.^[5]

A professional practice and a related service organization can therefore create a combined Section 415 problem even if no single payroll system sees both plans.

Employer identification belongs upstream of the contribution-limit calculation.

Same Employer, Two Plans: Add Them

Suppose one employer maintains:

• a 401(k) profit-sharing plan
• a separate money purchase pension plan

Participant receives annual additions under both.

For the limit, Section 415 generally collapses that employer's defined contribution arrangements into a single testing pool.^[5]

A recordkeeper that administers only one plan cannot safely assume its displayed remaining room is the participant's true Section 415 room.

The Limitation Year Is the Measuring Year

Section 415 works by limitation year.^[4][6]

If the plan does not specify another limitation year, IRS states that the calendar year is generally used.^[8]

A plan can define a different consecutive 12-month period under the regulatory rules.^[6][8]

Do not assume:

plan year = limitation year

without checking the document.

They often match.

They do not have to.

Midyear Entry Does Not Automatically Prorate $72,000

This distinction is easy to miss.

Suppose a calendar-year limitation year runs:

January 1–December 31

Employee becomes a participant:

July 1

The employee is eligible for only half the year.

That alone does not prorate the Section 415(c) dollar ceiling to $36,000.^[9]

IRS specifically distinguishes:

• a participant eligible for only part of a normal 12-month limitation year
• an actual short limitation year.^[9]

Only the second situation triggers the short-year proration rule.

Example: July 1 Participant

Normal limitation year:

January 1–December 31

Participant enters:

July 1

2026 dollar ceiling remains:

$72,000

rather than:

$36,000.^[9]

The participant's compensation, plan contribution formula and other limits can still produce a lower practical contribution amount.

The point is narrower:

participant eligibility for half a year does not itself cut the Section 415 dollar limit in half.

A Short Limitation Year Is Different

A short limitation year can arise when the plan:

• changes its limitation year
• terminates before the end of its normal limitation year
• is drafted with an initial short limitation period in specified circumstances.^[9]

Then the Section 415(c) dollar limit can require proration.^[6][9]

Example: Six-Month Short Limitation Year

Now use a plan with a six-month limitation year ending in 2026.

2026 full-year dollar limit:

$72,000

Approximate six-month fraction:

6 / 12

Prorated dollar ceiling:

$36,000

The precise calculation uses the regulatory rule, including fractional months where applicable.^[9]

Do not apply this proration merely because one participant joined midyear.

Plan Termination Can Create a Hidden Short-Year Problem

A plan that terminates effective before the final day of its normal limitation year is generally treated as having changed the limitation year so that it ends on the termination date.^[6][9]

That can reduce the Section 415 dollar ceiling for the final period.

An employer making a large final contribution at termination should calculate the short-year Section 415 limit before allocating the contribution.

The 100%-of-Compensation Side Also Uses the Limitation Year

When a short limitation year exists, the compensation used for the 100%-of-compensation test is compensation for that short limitation period.^[9]

That creates two potential reductions:

• prorated dollar limit
• compensation earned in the short limitation year.

A termination-year contribution should not be tested against full-year compensation when the governing limitation year is shorter.

After-Tax Room Is Residual Room, Not a Separate Limit

A plan permitting voluntary after-tax contributions might display:

After-tax maximum

That number is usually derived from several moving pieces.

Conceptually:

Section 415 limit − regular elective deferrals − employer match − other employer contributions − allocated forfeitures = possible remaining annual-additions room

Then apply:

• plan-specific after-tax cap
• ACP testing
• compensation
• payroll timing
• any other applicable restriction.

The remaining Section 415 room is not a promise that the employee can contribute that amount.

Example: After-Tax Room Calculation

Use sufficient compensation and assume no catch-up is included in the ordinary annual-additions stack.

Regular elective deferral:

$24,500

Matching contribution:

$7,500

Expected profit sharing:

$10,000

Annual additions before voluntary after-tax:

$42,000

Possible remaining Section 415 dollar room:

$72,000 − $42,000 = $30,000

If the plan permits voluntary after-tax contributions, $30,000 is the theoretical Section 415 room before considering other restrictions.

A later employer allocation reduces it.

Employer Contributions Made After Year-End Can Still Belong to the Earlier Limitation Year

Section 415 focuses on the limitation year for which an amount is credited or allocated under the governing rules, not merely the calendar date cash reaches the trust.^[4]

Employer profit-sharing contributions are often funded after year-end.

The contribution can still be an annual addition for the prior limitation year when allocated under the applicable plan and tax rules.

Do not use bank-deposit date alone to assign Section 415 year.

A Forfeiture Allocated Late Can Consume Room

The same concept applies to forfeitures.

If a forfeiture is allocated to a participant for a limitation year, it enters the annual-additions calculation for the applicable period.^[4]

A year-end Section 415 check performed before the final forfeiture allocation can therefore be incomplete.

The final allocation schedule should include every contribution source and forfeiture allocation.

Excess Annual Additions Are Not the Same as Excess Deferrals

Two separate failures are often confused.

Excess deferral

Employee exceeds the Section 402(g) elective-deferral limit.

Excess annual addition

The participant's Section 415 annual additions exceed the applicable Section 415(c) limit.^[8]

A participant can have one without the other.

The correction rules differ.

Example: No 402(g) Excess, But Section 415 Is Exceeded

Use this contribution mix:

Regular elective deferral:

$24,500

Matching contribution:

$15,000

Profit sharing:

$35,000

Total annual additions:

$74,500

The employee did not exceed the 2026 basic Section 402(g) deferral limit.

But annual additions exceed $72,000 by:

$2,500

unless catch-up treatment or another rule removes that amount from the annual-additions calculation.

Catch-Up Eligibility Should Be Tested Before Calling It an Excess

For a participant eligible for catch-up contributions, some elective deferrals that appear to push annual additions above Section 415 can qualify as catch-up amounts.^[11]

That classification can eliminate or reduce the Section 415 excess.

The plan should therefore determine:

1. Is the participant catch-up eligible?
2. Does the plan permit catch-up?
3. Which applicable limit was exceeded?
4. How much of the elective deferral qualifies for catch-up treatment?

Only then calculate the remaining excess annual addition.

Correcting a True Section 415 Excess

IRS's current correction page outlines a correction sequence for a participant with employer contributions and employee elective deferrals.^[8]

At a high level, the method can involve:

1. distributing unmatched elective deferrals, adjusted for earnings
2. if needed, distributing matched elective deferrals and forfeiting associated match
3. if an excess remains, forfeiting employer profit-sharing or other employer amounts under the applicable correction method.^[8]

Voluntary after-tax contributions have their own place in the correction ordering under EPCRS.^[8]

Use the current IRS correction procedure for the actual facts.

A Corrective Distribution Is Not an Ordinary Rollover Distribution

IRS states that a corrective distribution used to fix a Section 415 failure is not an eligible rollover distribution.^[8]

The tax reporting depends on what is returned.

For example:

• elective-deferral amounts can be taxable when distributed
• returned after-tax employee contribution basis has different tax treatment
• allocable earnings can be taxable.

The correction should be handled through the plan administrator rather than by asking the participant to take an ordinary withdrawal.

Excess Employer Contributions Do Not Simply Become the Participant's Money

Where the correction requires employer amounts to be forfeited, IRS procedures can place those amounts into an unallocated plan account to reduce employer contributions in the current or later years under the correction framework.^[8]

The sponsor should not solve a Section 415 excess by:

"leaving the extra employer contribution in the participant's account and stopping next year's contribution."

The violation occurred in the limitation year that exceeded the limit.

The Annual 415 Schedule Should Be Participant-Level

IRS recommends preparing a Section 415 allocation schedule for each participant.^[8]

At minimum, reconcile:

The schedule should be completed after all contribution sources and forfeiture allocations are known.

Frequently Asked Questions

What is the 401(k) annual-additions limit for 2026?

The Section 415(c) dollar limit is $72,000 for 2026, but compensation can impose a lower participant-specific ceiling when 100% of Section 415 compensation is less than that amount.^[1][2][3][4]

Is $72,000 the amount I can personally defer from my paycheck?

No. The basic employee elective-deferral limit is $24,500 for 2026, before applicable catch-up contributions.^[1][2][3]

What counts toward the $72,000 limit?

Common annual additions include regular elective deferrals, voluntary after-tax employee contributions, employer match, employer nonelective or profit-sharing contributions and allocated forfeitures.^[1][4][8]

Do Roth 401(k) contributions count toward $72,000?

Regular designated Roth elective deferrals do. Roth tax treatment does not remove them from annual additions.

Do voluntary after-tax contributions count?

Yes. After-tax employee contributions are annual additions.^[1][8]

Does the employer match count?

Yes.^[1][8]

Do profit-sharing contributions count?

Yes. Employer nonelective and profit-sharing contributions generally enter the annual-additions calculation.^[1][8]

Do forfeitures count?

Allocated forfeitures generally count.^[1][4][8]

Do catch-up contributions count against $72,000?

Qualifying Section 414(v) catch-up contributions generally do not.^[1][8][10]

What are the 2026 catch-up limits?

The general limit is $8,000. Eligible participants ages 60 through 63 have a higher $11,250 catch-up limit for 2026.^[2][10]

Do rollover contributions count?

Generally no.^[8]

Do 401(k) loan repayments count?

Ordinary loan repayments generally do not, subject to the special above-market-interest point identified by IRS.^[8]

Do investment gains count?

No. Investment return changes account value but is not an annual contribution or forfeiture allocation.

Is the $72,000 limit per plan?

Not necessarily. An employer's defined contribution arrangements generally share one Section 415 testing pool, and applicable related employers can be pulled into that same pool.^[5][7]

If I have two unrelated employers, can each have a separate Section 415 limit?

Generally, unrelated employers can have separate employer-level Section 415 limits. The employee's Section 402(g) elective-deferral limit remains a separate person-level constraint across applicable plans.^[1][5]

Does owning two companies give me two $72,000 limits?

Not automatically. Section 415's related-employer rules can require the companies' defined contribution plans to be aggregated.^[5][7][12]

Does a midyear plan entry cut the $72,000 limit in half?

No. Participant eligibility for only part of a normal 12-month limitation year does not itself prorate the dollar limit.^[9]

When is the $72,000 limit prorated?

A short limitation year can require proration, such as when a limitation year is changed or a plan terminates before the end of its normal limitation year.^[6][9]

What happens if contributions exceed Section 415?

First determine whether catch-up treatment removes any elective deferral from annual additions. A remaining excess is a plan qualification failure and must be corrected using the applicable IRS correction method.^[8][11]

The Section 415 Stack

For each participant, calculate:

1. regular pre-tax elective deferrals
2. regular Roth elective deferrals
3. voluntary after-tax employee contributions
4. employer match
5. employer nonelective/profit-sharing contributions
6. allocated forfeitures
7. annual additions under other plans that must be aggregated

Then subtract qualifying catch-up contributions from the ordinary annual-additions stack when the law permits.

Compare the result against both ceilings:

• $72,000 for 2026
• 100% of Section 415 compensation

The lower ceiling controls.

That calculation answers the Section 415 question.

It does not replace Section 402(g), ADP, ACP, plan-specific contribution limits or the Section 401(a)(17) compensation cap.

Sources & References

1. IRS: 401(k) and Profit-Sharing Plan Contribution Limits
2. IRS: COLA Increases for Dollar Limitations on Benefits and Contributions
3. IRS Notice 2025-67: 2026 Cost-of-Living Adjustments
4. 26 CFR §1.415(c)-1: Limitations for Defined Contribution Plans
5. 26 CFR §1.415(f)-1: Aggregating Plans
6. 26 CFR §1.415(j)-1: Limitation Year
7. 26 U.S.C. §415: Limitations on Benefits and Contributions Under Qualified Plans
8. IRS: Fixing Common Plan Mistakes — Failure to Limit Contributions for a Participant
9. IRS: Treatment of 415(c) Dollar Limitations in a Short Limitation Year
10. IRS: Retirement Topics — Catch-Up Contributions
11. IRS: 401(k) Plan Catch-Up Contribution Eligibility
12. IRS: 403(b) Aggregation With a Section 401(a) Defined Contribution Plan

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan contribution limits and administration. This article is not legal, tax, fiduciary or plan-administration advice. Section 415 treatment depends on compensation, contribution source, limitation year, catch-up eligibility, employer relationships, other plans maintained by the employer and current law.

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