Final answer:
Annual additions to qualified retirement plans encompass employer contributions, employee contributions, and forfeitures reallocated to participants, but not interest and dividend income.
Step-by-step explanation:
Annual additions to qualified retirement plans include employer contributions, employee contributions, and forfeitures reallocated to plan participants. Interest and dividend income generated within the plan are not considered annual additions for the purpose of contribution limits. Defined contribution plans such as 401(k)s and 403(b)s, which have largely replaced pensions, allow employers to make regular contributions to an employee's retirement account, with employees often contributing as well. The funds in these accounts are invested in a variety of vehicles, are tax-deferred, and can be transferred to a new employer if the individual changes jobs.