### Question
What does average annual compensation mean?


### Answer
**Average annual compensation** has the following meaning in *26 U.S.C. § 401*:

> the participant's highest average annual compensation for—



(i) any period of at least 3 consecutive years, or



(ii) if shorter, the participant's full period of service

#### Citation:
  - *26 U.S.C. § 401*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter D-Deferred Compensation, Etc. > PART I-PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC. > Subpart A-General Rule**

