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).
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.
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).
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.
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 longer DCP Enrollment Form.
If you leave employment and later return to a DCP-covered employer, resuming your DCP contributions is easy. Just fill out a new enrollment form to get started!
New employees: Have you received a letter about being automatically enrolled in DCP? The DCP Automatic Enrollment page can provide you with more information.
See the Automatic Enrollment section.
Contribute to your DCP account in dollar or percentage amounts. The choice is yours. These 2020 limits apply to all DCP participants:
The minimum monthly contribution is $30 or 1% of your pretax income.
The maximum annual contribution limit is $19,500, which is equal to:
Participants age 50 and older: You’re allowed an additional $6,500 for a maximum limit of $26,000. This is equal to:
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.
Can I continue contributing to DCP after I separate from employment? No, once you separate from service you can’t continue contributing to DCP.
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.
If your employer provides compensation for unused annual or sick leave, consider deferring these cashouts 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 cashouts, contact DRS at 800-547-6657 at least 30 days before you separate. You’ll need to have this information:
Note: If your participation in VEBA (Voluntary Employees’ Beneficiary Association) is funded by sick leave cashouts, 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.
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.
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.”
Here are some questions beneficiaries commonly ask about their 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, see the beneficiary withdrawal form.
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.
With online account access, you can make DCP account changes 24/7. Log in through DRS or access your account through the record keeper website. Visit drs.wa.gov/login/ to see your options.
Access your account to:
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.
If you decide to withdraw your savings before you reach retirement age, there are no additional tax penalties.
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.
Also called a Retirement Savings Contributions Credit, you might qualify for this tax savings. With this credit, you can write off 10% to 50% of your first $2,000 in contributions. There are some income limits for this opportunity:
For more information, visit the IRS website and see the instructions for Form 8880.
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.
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.
Yes. If you choose a lump sum or partial lump sum payment to be paid directly to you, or receive payments over a period of less than 10 years, 20% of your distribution will be withheld for federal taxes. If you choose installments of 10 years or more, your payments are considered ordinary income in the year they are issued. For specific tax consequences regarding your distribution, consult your tax advisor.
Tax form for withdrawals: IRS Form W-4P – Request to have federal income tax withheld from each withdrawal or annuity payment you receive.
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.
You’ll receive a quarterly statement with performance information for your investment account. 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:
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.