Additional Voluntary Contributions


What are Additional Voluntary Contributions?


Contributing members may also make tax deductible additional voluntary contributions (AVCs). These contributions do not provide the member with additional service but are rather like a separate retirement savings account that are subject to certain limits.

AVCs are credited with TRAF's rate of return (positive or negative). The balance in the account can be:

  • Converted to an annuity at retirement (not eligible for cost of living adjustment) which supplements your TRAF pension, or
  • Used to purchase eligible service such as substitute service or educational leaves, or
  • Withdrawn as cash, less withholding taxes or transferred on a tax-deferred basis to your RRSP any time before you retire.

What are the limits?

You can make AVCs to TRAF up to the lesser of:

  • 18% of your salary, or
  • The Money Purchase limit as prescribed by the Income Tax Act (Canada),

less your pension adjustment.

Making AVCs this year will reduce your allowable RRSP contribution room next year by the same amount.

Why should I make Additional Voluntary Contributions?

Planning for your retirement is a very personal matter. AVCs are one option for increasing your retirement income.

Advantages:

  • You can take advantage of TRAF's comprehensive investment program and low administrative costs.
  • You participate in TRAF's investment opportunities.
  • Contributions are made through payroll deduction by your school division.
  • You can increase your retirement income on a tax-effective basis.

Disadvantages (as compared to an RRSP contribution):

  • TRAF's investment strategy is focused on the long-term funding objectives of the pension plan and may not be consistent with your investment objectives and risk tolerance.
  • With an RRSP contribution, you can tailor your investments to meet your personal investment objectives and risk tolerance, particularly as you near retirement.
  • RRSP contributions are available for other uses such as the Home Buyers' Plan and Lifelong Learning Plan.

How do I make Additional Voluntary Contributions?

AVCs are deducted from your salary up to the permitted limits under the Income Tax Act (Canada). You may increase, decrease or stop your payroll deduction at any time.

You will need to use the Additional Voluntary Contribution Calculator to:

  • Determine the amount you can contribute, and
  • Apply to have additional voluntary contributions deducted from your pay.

To apply, you must:

  • Complete the application contained in the Additional Voluntary Contribution Calculator, and
  • Print, sign and submit one copy of this form to your school division and one signed copy to TRAF.