DEFINITION of 'Additional Voluntary Contribution – AVC'

An extra allocation of funds to a retirement savings account that is above the amount that an employer will provide a matching contribution for. Additional voluntary contributions are made at the discretion of the employee and go to an employer sponsored pension plan. Additional contributions can be made to tax-deferred savings accounts such as the 401(k), 403(b) and individual retirement accounts (IRAs).

BREAKING DOWN 'Additional Voluntary Contribution – AVC'

Additional voluntary contributions allow employees to contribute more money to their tax-deferred savings account. Employer-sponsored retirement plans typically indicate the percentage of the employee's salary that will be matched with contributions by the employer towards the retirement plan. Employees can make additional payments to increase the account's value and thereby increase the amount of money the employee will receive following retirement. Additional voluntary contributions may vary in tax treatment depending on the type of plan, but if they are made into a tax-defered account, any returns accumulate tax-free until retirement.

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