What Is an Additional Voluntary Contribution (AVC)?
An employee’s tax-deferred payment to a retirement savings account that exceeds the amount their employer matches is referred to as an “additional voluntary contribution” (AVC).
The employee is allowed to make additional voluntary contributions each year up to a certain amount that has been approved by the Internal Revenue Service (IRS).
IMPORTANT TAKEAWAYS:
An employee can make an additional voluntary contribution to a retirement plan in addition to the employer’s matching contributions.
When retirement funds are withdrawn, excessive IRA contributions will be subject to a 6% excess contribution tax.
The maximum contribution to 401(k) plans will be $20,500 in 2022, rising to $22,500 in 2023, with an additional $6,500 for people 50 and older, rising to $7,500 in 2023.
The maximum contribution to IRA accounts will be $6,000 in 2022, rising to $6,500 in 2023, with an additional $1,000 for employees over 50.
What is an Additional Voluntary Contribution (AVC)? Employees can add money to tax-deferred savings accounts like 401(k), 403(b), SEP-IRA, and SIMPLE IRA plans on their own. The employee is unable to contribute money before taxes to Roth IRAs or designated Roth accounts.
