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DCP - Deferred Compensation Program

DCP Guide

What is DCP?

The Deferred Compensation Program (DCP) is a special type of savings program that helps you invest for the retirement lifestyle you want to achieve—a lifestyle that might be hard to reach with just your pension and Social Security.
Unlike traditional savings accounts, DCP is tax-deferred — it lowers your taxable income while you are working and it delays payments of income taxes on your investments until you withdraw your funds. DCP is a great way to save.
DCP is an IRC Section 457 plan administered by the Washington State Department of Retirement Systems (DRS).

Easy

Contributions are automatically deducted from your paycheck, so saving is easy. Start with as little as $30 per month. You can also let your contributions grow with percentage deductions.

Flexible

Online or by phone, you can change your contribution amount and investment selections at any time. Your changes can take up to 30 days to go into effect (depending on your employer’s payroll cycle).

Smart

DCP offers a variety of professionally managed investment options, including “one-step” funds that automatically rebalance the asset mix as you move toward your target date for retirement. Funds are selected by the Washington State Investment Board, with fees among the lowest in the marketplace.

 

Regulations: DCP adheres to administrative codes or rules adopted by Washington agencies. See the DCP section of the  WAC (Washington Administrative Code).

Enrollment

Employees of Washington state and political subdivisions who offer the DCP program are eligible to participate in DCP. Enrollment is easy!

Ready to enroll in DCP? Complete the quick enrollment form. With this easy form, you’ll be done in minutes!

If you prefer to choose your investments now or add additional information about employer contributions, use this detailed DCP Enrollment Form.

Reenrolling in DCP

If you leave employment and later return to a DCP-covered employer, resuming your DCP contributions is easy. Complete a new enrollment form to get started! 

Automatic enrollment for new hires

New employees: Have you received a letter about being automatically enrolled in DCP? Because DCP is voluntary, there are actions you can take once you receive your enrollment notification letter in the mail. For example, you can change your contribution amount or your investment options. You can also opt out of DCP with the option to rejoin later.

Enrollment timeline

  • Day 1 You are hired
  • About 30 days after hire You receive a mailed DCP notification letter (the timing is dependent on your employer’s payroll cycle)
  • Within 30 days of date on notification letter You have 30 days to opt out of DCP enrollment if you do not want to participate
  • 3 months after your hire date Your 3% paycheck contributions begin if you make no changes to your DCP account
  • Within 90 days of your first contribution You can still withdraw your automatic enrollment contributions and stop your deferrals.
    Example: Someone hired in February will begin DCP contributions in May and will have until August to stop and withdraw these contributions
  • 90 days after your first contribution At any time during your employment, you can change or stop your contributions, and you can change investment options. Only normal withdrawals are permitted after this point (normal withdrawals are when you leave DCP-covered employment).

Why have I been enrolled? Your organization participates in automatic enrollment.

 

Are any employees exempt from automatic enrollment? Yes. Automatic enrollment does not include student employees or retirees returning to work, even if they fit the newly hired/full time employee status.

 

How do I change my DCP options or opt out of automatic enrollment? Once you receive a DCP notification letter you can choose to opt out, change your contribution options or select another investment. Make these changes through your online account or call 888-327-5596.

 

How much will I contribute with automatic enrollment? 3% of pretax income is the default deferral rate.

 

When will I make my first contribution? Approximately three months after your hire date. The time varies due to your employer’s payroll cycles. Changes made during the initial automatic enrollment period make you an active DCP participant, which means your contributions may begin sooner AND you can no longer withdraw any contributions made under automatic enrollment.

 

What kinds of changes make me an active participant? If you change your investment option or contribution amount, this will make you an active participant (which means you can no longer withdraw any contributions made during automatic enrollment).

 

Can I make changes after the opt-out deadlines have passed? Yes. At any time during your employment, you can stop your deferrals or change your contribution amounts. You can also change investment options.

 

Where will my contributions be invested? Your contributions will be invested in the Retirement Strategy Fund that assumes you’ll begin withdrawing funds at age 65.

 

How do I designate a beneficiary for this account? Once you are enrolled, designate beneficiaries through DRS using online account access or the beneficiary form; if you don’t designate a beneficiary, the payment would go to your estate.

 

If I opt out, can I join DCP later? Yes.

 

Can I withdraw contributions made during automatic enrollment? Yes. If you make this choice within 90 days from your first contribution, you can withdraw your contributions from DCP as long as the record keeper receives your withdrawal form within the 90 days. Call the DRS record keeper at 888-327-5596 to request a form.

 

Are my contributions subject to tax withholding if withdrawn? Yes, because your contributions are pretax dollars. The tax withholding is 10%.

Contributions

Limits 

With DCP, you can change your contributions at any time. This includes starting, stopping, increasing or decreasing the amounts you contribute from your paycheck. Contribute to your DCP account in dollar or percentage amounts. The choice is yours. These 2021 pretax income limits apply to all DCP participants:

Minimum monthly contribution limit: $30 or 1% of your earnings
Maximum  annual contribution limit: $19,500

 

This annual maximum limit is equal to:

  • $1,625 per month for 12 months for monthly payrolls
  • $812 per 24 semi-monthly pay periods
  • $750 per 26 bi-weekly pay periods

Catch-up options

Participants age 50 and older: You’re allowed an additional $6,500 for a maximum limit of $26,000. This is equal to:

  • $2,166 per month for 12 months for monthly payrolls
  • $1,083 per 24 semi-monthly pay periods
  • $1,000 per 26 bi-weekly pay periods

Special Catch-up limit: In addition to the limits above, a Special Catch-up limit of $39,000 could be available to those participants nearing retirement. To determine your eligibility, call DRS at 800-547-6657.

Special deferral limits: If you are under age 50 and want to defer over the monthly maximum of $1,625, or if you’re 50 or older and want to defer over the maximum of $2,166, contact us for a Special Deferral form: 800-547-6657.

Changing and stopping contributions

To change your contribution amount, log in to your account. From the DCP account page, select Change Monthly Contribution, Transactions. Your changes can take up to 30 days to go into effect (depending on your employer’s payroll cycle). If you separate from employment and later return to work for an employer who participates in DCP, you can reenroll anytime. If any payments from your account have started, they will stop. Estimate contributions with the DCP calculator.

Can I continue contributing to DCP after I separate from employment? No, once you separate from service you can’t continue contributing to DCP.

Sick leave cash-out

If your employer provides compensation for unused annual or sick leave, consider deferring these cash-outs into DCP to maximize your contributions at retirement. Taxes are not paid on this money until you withdraw it from your account. Maximum limits apply, and your employer must participate in DCP for you to be eligible.

To take advantage of one-time leave cash-outs, contact DRS at 800-547-6657 at least 30 days before you separate. You’ll need to have this information:

  • Number of hours you’ll be cashing out
  • Your base pay rate
  • The date the leave cash-out will be paid

 

Note: If your participation in VEBA (Voluntary Employees’ Beneficiary Association) is funded by sick leave cash-outs, those funds may not be directed to DCP. Please check with your payroll or human resources department to verify VEBA participation and how it is funded.

Rollovers into DCP

Any time you are enrolled in DCP, you can roll over certain distributions into DCP from an Individual Retirement Arrangement (IRA), IRC 457 distributions from your current employer, or from a former employer’s retirement plan. You can contact your IRA custodian or former employer to determine how rollovers are handled, then complete the Rollover In Request form. DCP will invest your rolled funds according to your current investment allocation.

Withdrawals

Eligibility

For most customers, you must be separated from DCP-covered employment to withdraw from your account.

If you submit a withdrawal request while you are still employed, the request will be held for up to 180 days until we receive a separation date from your employer. Once you separate, the funds will be released to you.

In some cases, you can withdraw your DCP funds while you are still working for a DCP-covered employer. Here are those exceptions:

  • Unforeseeable emergency withdrawals: If you are experiencing severe financial hardship because of an unforeseeable emergency, you may be eligible to withdraw funds from your DCP account. IRS requirements restrict this type of withdrawal, and may limit the amount you can withdraw. For more information, call 888-327-5596.
  • Automatic Enrollment Withdrawal: New employees automatically enrolled in DCP have up to 90 days after their first paycheck deferral to cancel DCP and withdraw any contributions. After 90 days, standard withdrawal eligibility applies. For more information, call 888-327-5596.
  • De Minimus Request: If you have not contributed to DCP in at least 24 months, and your account balance is under $5,000, you can request a one-time withdrawal of these funds. See the DCP In-Service Withdrawal form.
  • Age 72 or Older RMD: You are not required to take an IRS required minimum distribution (RMD) if you are still under DRS-covered employment. However, if you are age 72 or older and you wish to withdraw or rollover from your account while you are employed, you can. Log in to complete this withdrawal online (Go to Account, Withdrawals, Request a Withdrawal, and select the withdrawal type), or complete the paper DCP In-Service Withdrawal form.
  • Withdrawing Rolled-in Contributions: If you rolled funds from another plan or program into your DCP account, you can withdraw these funds. Keep in mind that these funds still carry any tax requirements or early withdrawal penalties they arrived with when you rolled them in. Log in to complete this withdrawal online (Go to Account, Withdrawals, Request a Withdrawal, and select the withdrawal type), or complete the paper DCP In-Service Withdrawal form.
  • Transferring to Another Provider Under the Plan: If you have not separated from your employer, but have transferred to a position that participates in a 457 deferred compensation program outside of Washington State DCP, you can withdraw your funds to transfer them to the participating plan. See the DCP In-Service Withdrawal form.

How to withdraw from DCP

There are two ways to access your DCP account funds: Use online withdrawal, or complete a paper form. We recommend online withdrawal because it’s faster and easier than a paper form. With online withdrawal, your account information is prefilled for you, you can estimate payments and tax withholdings instantly and add your direct deposit information. You’ll also receive immediate confirmation that your transaction is in progress.

To complete your withdrawal online, log into your online account and select your DCP account.
Under the Quick Access menu, select Request Online Withdrawal.

In some cases, you may be unable to complete your DCP withdrawal online. Or maybe you prefer to complete and mail in a paper form. Either way, we’ve got you covered here.

DCP Withdrawal Forms

DCP and JRA Withdrawal – This form covers most DCP withdrawals. Use it to request withdrawals when you separate from employment or to change your current distribution option if you are already receiving payments. You can also complete this request online.

DCP In-Service Withdrawal – Use this form to request DCP withdrawals while you are still employed. See the above section “Can I withdraw from DCP while employed?” for eligibility information. Some of these transactions can also be completed online

RMD Change Request – Customers who receive a required minimum distribution (RMD), use this form to request changes to your annual minimum distributions. More about required minimum distributions

More withdrawal forms

For the following withdrawal types, you’ll need to call the DRS record keeper to get the form you need. Call 888-327-5596 or log into your DCP account to chat live with a customer service associate. They will help you select the right form for your needs.

Beneficiary Distribution Request – Request a withdrawal from your awarded beneficiary account.

Alternate Payee Withdrawal – Used to withdraw funds per a Qualified Domestic Relations order, this form can be obtained by calling 888-327-5596.

Unforeseeable emergency withdrawals – If you are experiencing severe financial hardship because of an unforeseeable emergency, you may be eligible to withdraw funds from your DCP account. IRS requirements restrict this type of withdrawal, and may limit the amount you can withdraw.

Automatic Enrollment Withdrawal – New employees automatically enrolled in DCP have up to 90 days after their first paycheck deferral to cancel DCP and withdraw any contributions. After 90 days, standard withdrawal eligibility applies.

Related forms

Direct Deposit – Use this form to request or modify the direct deposit information for your DCP, Plan 3 or JRA investment account payments. You can also complete this request online

IRS Form W-4P – Request to have federal income tax withheld from each withdrawal or annuity payment you receive.

Withdrawal timeline

In general, if we have your separation date on file, DCP withdrawals happen pretty fast—within a few business days. If you have not yet separated from DCP-covered employment, we’ll release your payment once we receive the separation date from your employer.

Some special DCP withdrawal types differ in their payment timelines and whether separation from employment is required. When you complete your withdrawal, you’ll receive information specific to your withdrawal type.

Payment options

Your DCP account offers several options for withdrawals. 

  • Receive one-time or regular payments in an amount and frequency you choose
  • Purchase an annuity or service credit
  • Roll your DCP funds into another retirement savings account

You can also leave your DCP savings invested for as long as you want even if you separate from DCP-covered employment. Minimum withdrawals are required by the federal government when you reach a certain age. See required minimum distributions

Yes, once you begin receiving payments, you can change your payment amount, frequency of payments and payment date at any time. Make changes through your online investment account or using the paper forms listed in the section above.

Beneficiaries

In the event of your death, your beneficiaries will receive payment from your DCP account. Keeping your beneficiaries updated is important. Your DCP beneficiaries must be declared separate from any beneficiaries you’ve selected for another plan or program, like a pension. You can name anyone as your beneficiary: spouse, child, domestic partner, friend, neighbor, etc. You can also designate a charity or trust. If you die without a current beneficiary designation on file, a distribution will be made to your estate.

Once you are enrolled in DCP, update your beneficiaries online through drs.wa.gov/oaa. Or complete the paper form (Beneficiary Designation) and mail it to DRS. See the Forms section of the DRS website.

Information for beneficiaries

The DCP account holder (participant) selects one or more beneficiaries. When DRS is notified of the participant’s death, we mail a letter and beneficiary form to each beneficiary on file. Once the form is returned to DRS, we set up a separate account under the beneficiary’s Social Security number. This account is called a “beneficiary account.”

What are my withdrawal options? If you are a spouse, you have the same withdrawal options as the participant did. You can leave the money in the account, withdraw in full or withdraw it in payments. If you are not a spouse, you can withdraw the funds. For more specific information about withdrawal options, contact the DRS record keeper.

 

Can I contribute additional funds to the awarded beneficiary account? No.

 

Can I roll my beneficiary account funds into my IRA? A spouse beneficiary can roll the funds into a traditional IRA. A non-spouse can roll the funds into an inherited IRA.

 

Can I roll my awarded beneficiary account into my own DCP account? No. The accounts must be kept separate for distribution purposes. However, you can withdraw the beneficiary account funds while you are still working for a DCP-covered employer.

 

How do I name a beneficiary for my awarded beneficiary account? You can’t. Upon your death, any remaining funds go directly to your estate.

 

Beneficiary or survivor, what is the difference? A survivor is the spouse or registered domestic partner of the participant at the time of passing. The survivor beneficiary has the same account withdrawal options as the participant did. A beneficiary who is not a survivor is a non-spouse.

 

Who can I contact? For more information about beneficiaries, contact DRS.

Taxes

Pretax contributions

Your contributions are deducted before tax, which keeps more of your dollars working for you. This is called tax-deferred savings. With DCP, your contributions are only taxed when you withdraw them, and you only pay federal income tax.

How is my withdrawal taxed?

DCP has no federal tax penalty for early withdrawals, which means you can withdraw your savings at any age. However, your DCP contributions are deducted from your pre-tax salary. This means you will need to pay federal income tax on any money you withdraw from DCP.

When you complete your withdrawal, you’ll receive tax information specific to your withdrawal type. If you complete your withdrawal online, you’ll also receive a real-time estimate of your tax withholding. For example, rollovers from your DCP contributions are not taxed until you actually withdraw the rolled funds.

The likelihood of lower taxes will depend on your income, current tax bracket and any contribution decisions you make. DRS and the DCP record keeper cannot offer financial counseling. Consult a financial advisor for advice on tax savings.

  • Federal Tax Saver’s Credit Also called a Retirement Savings Contributions Credit, you might qualify for this tax savings. With this credit, you can write off a portion of your annual contributions. Visit the IRS website to see the income limits as well as eligibility information for this opportunity.

 

  • While you are contributing When you make contributions to your DCP account, you lower your taxable income. Why? DCP contributions are tax-deferred, meaning you don’t pay tax on them until you withdraw the funds.

 

  • After you retire When you move into retirement, it is likely you will have a lower income than you did while working. Lower income means lower taxes, which means your DCP contributions could have lower tax when you withdraw them.

Managing your account

You can make DCP account changes anytime through your online account.

Access your account to:

  • View your DCP balance
  • Change your contribution amounts
  • Change your investment elections
  • Transfer account balances between investment options
  • See fund performance
  • Withdraw funds from DCP

Your statements will be available through your online account unless you opt into mailed statements through the record keeper

 

Quarters are divided into the following months:

  • First: January through March
  • Second: April through June
  • Third: July through September
  • Fourth: October through December

 

Your statement could include information for more than one plan, depending on your situation. Quarterly statements are released within two months of the quarter-end.

DCP Resources
On track infographic

Updating Your Address and/or Name

Retirees, inactive members, beneficiaries and legal-order payees: You can update your address from your online retirement account. Just select “Address” from the welcome screen. If you need to update your name, fill out and send in a printed form as well as a copy of documentation showing the change.

Active members: Update your name and/or address through your employer. That new information will soon appear in your online retirement account.

Direct Deposit

Set up and manage direct deposit of your benefit payments from your online retirement account. Just follow the “Direct Deposit” directions under “My Account” in the navigation menu.

(If you prefer to fill out and mail in a printed form, select this link.)

Beneficiary Designation

Members, you can update your beneficiary information from your online retirement account. Select “My Account” in the navigation menu and then “View/Edit” beside “Beneficiary.”

(If you prefer to fill out and mail in a printed form, select this link.)