Section 415(c) Annual Additions Limit: Caps, Catch-Ups, and Excesses

For 2026, the Section 415(c) annual additions limit caps total contributions to your defined contribution retirement account at $72,000 or 100% of your compensation, whichever is less.¹ Every dollar flowing into the account from every source counts toward that ceiling: your own deferrals, your employer’s match and profit-sharing, and any forfeitures reallocated to you. Catch-up contributions sit on top of the cap and are the main way older workers legally push more money in.

What Counts Against the $72,000 Cap

Section 415 defines an “annual addition” as the combined total of three categories.²

Employer contributions include matching funds, profit-sharing allocations, and any other nonelective deposits your company makes. Vesting status is irrelevant. If your employer puts $20,000 into your account and you would forfeit half by quitting tomorrow, all $20,000 still counts for the year.

Employee contributions cover everything you personally put in: traditional pre-tax deferrals, Roth deferrals, and voluntary after-tax contributions (the “mega backdoor” bucket, in plans that allow it). Roth money is taxed before it enters the plan, but the IRS counts it the same way for 415(c) purposes.

Forfeitures arise when someone leaves before vesting in employer contributions and those dollars get reallocated to remaining participants. When forfeited funds land in your account, they count as a fresh annual addition.

The $72,000 ceiling is separate from the $24,500 elective deferral limit that governs how much you personally can defer into a 401(k), 403(b), or similar plan in 2026.³ Deferral rules restrict the employee side; 415(c) restricts the grand total. A participant who defers $24,500 and receives $47,500 in employer contributions hits the $72,000 ceiling exactly.

The 100% of Compensation Prong

The percentage test matters most for lower earners. If you make $48,000, your annual additions cap at $48,000, not $72,000. Most people never bump into this prong because combined contributions don’t approach a full salary, but the rule prevents anyone from sheltering more than they actually earned.

Compensation for this test generally means gross W-2 wages plus any elective deferrals you directed into retirement, health, or cafeteria plans. Bonuses, commissions, and overtime typically count even if your plan excludes those items when calculating the employer match. Non-cash fringe benefits, unexercised stock options, and payments from nonqualified deferred compensation plans do not.

What Sits Outside the Limit

Several types of account activity fall outside the 415(c) calculation.⁴

Catch-up contributions. If you are 50 or older, you can contribute an additional $8,000 beyond the $72,000 ceiling in 2026. This amount sits entirely outside the annual additions limit.¹
Rollover contributions. Moving money from a previous 401(k) or IRA into your current plan does not count as a new addition. Those dollars are existing savings changing addresses.
Loan repayments. Paying back a loan from your own account restores funds you already contributed and is not a new contribution. The narrow exception: if the loan charges above-market interest, the excess interest portion may count.

The Enhanced Catch-Up for Ages 60 Through 63

Starting in 2025, SECURE 2.0 created a higher catch-up tier for participants who turn 60, 61, 62, or 63 during the year. For 2026, this enhanced catch-up is $11,250 for 401(k), 403(b), and governmental 457(b) plans.¹ That replaces the standard $8,000 catch-up during those four years, giving you an extra $3,250 of headroom.

Like the standard catch-up, the enhanced amount does not count toward the $72,000 cap. A participant who turns 62 in 2026 could receive $72,000 in regular annual additions plus $11,250 in catch-up, for a combined $83,250. Once you turn 64, you drop back to the $8,000 tier.

Working for More Than One Employer

How the 415(c) limit applies when you have multiple jobs depends on whether the employers are related.

If your employers are completely unrelated, you get a separate $72,000 limit under each employer’s plan. Additions in one plan are not aggregated with those in another.⁵ The $24,500 elective deferral limit, however, applies per person across all plans, so you cannot defer $24,500 into each one.

If your employers are part of a controlled group or affiliated service group under Sections 414(b) or 414(c), the IRS treats them as a single employer. All plans of that group are aggregated, and your combined annual additions cannot exceed $72,000.⁶ This rule catches business owners who set up separate entities hoping to multiply their contribution room.

Self-Employed and Solo 401(k) Contributors

The same $72,000 ceiling applies if you are self-employed, but the math to get there is different. Instead of W-2 wages, the statute uses “earned income,” which is your net self-employment income after deducting one-half of self-employment tax and your own retirement contribution.⁷ That circular calculation means your effective contribution percentage is lower than it first looks.

In a solo 401(k), you wear two hats. As the employee, you can defer up to $24,500 of earned income. As the employer, you can add a profit-sharing contribution of up to 25% of plan compensation, calculated on the reduced net-earnings basis described above.⁸ The combined total from both sides cannot exceed $72,000, plus any applicable catch-up.

Short Limitation Years

The limitation year is usually the 12-month period the plan uses to track contributions, often the calendar year. If a plan has a limitation year shorter than 12 months, the $72,000 dollar limit is prorated by multiplying by the number of months in the short year and dividing by 12.⁹ This comes up when a plan changes its plan year, terminates mid-year, or starts partway through a year. If you personally join an existing plan mid-year, there is no proration; you get the full $72,000 ceiling.

What Happens If Contributions Exceed the Limit

When total additions accidentally exceed the 415(c) limit, the plan must correct the error to keep its tax-qualified status. The IRS provides a structured path through the Employee Plans Compliance Resolution System, and most errors can be self-corrected without contacting the IRS or paying a fee if the fix happens by the end of the third year after the error.⁴ The correction typically returns your voluntary after-tax and elective deferral contributions first (with earnings) before forfeiting related employer contributions into a suspense account.

A corrective distribution is reported on Form 1099-R, and the amount plus attributed earnings is taxable income in the year you receive it. The 10% early distribution penalty does not apply, and the returned money cannot be rolled into another qualified plan or IRA.

The most common trigger is a mid-year job change where both employers contribute aggressively, or a controlled-group situation where affiliated plans fail to coordinate. If you participate in another employer’s plan, tell your new plan administrator during onboarding so allocations can be monitored before the total drifts past $72,000.

1
Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs
2
Office of the Law Revision Counsel. 26 USC 415 – Limitations on Benefits and Contribution Under Qualified Plans
3
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
4
Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Limit Contributions for a Participant
5
eCFR. 26 CFR 1.415(f)-1 – Aggregating Plans
6
Internal Revenue Service. Chapter 7 – Controlled and Affiliated Service Groups
7
Office of the Law Revision Counsel. 26 US Code 415 – Limitations on Benefits and Contribution Under Qualified Plans
8
Internal Revenue Service. One-Participant 401(k) Plans
9
Internal Revenue Service. Issue Snapshot – Treatment of 415(c) Dollar Limitations in a Short Limitation Year