DRS Notice 22-004, New Roth 457 option coming to DCP
Notice No: 22-004
Date: April 27, 2022
Applies to: All Employers
Subject: DRS Notice 22-004, New Roth 457 option coming to DCP
The Department of Retirement Systems will offer a Roth 457 option by December 2023
A new bill (Engrossed House Bill 1752) requires DRS to offer a Roth 457 option through the state Deferred Compensation Program (DCP) no later than December 2023.
How the DCP Roth 457 will work
The Roth 457 will allow employees to make after-tax contributions to DCP (the current 457 plan only allows pre-tax contributions).
- The IRS contribution limits for all 457 plans will apply, whether the employee’s contributions are pre- or post-taxed
- If an employee switches halfway through the year to the Roth 457 after-tax option, their previous pre-tax contributions will be combined to calculate their total contribution limit
- If an employee meets certain criteria and withdraws from their Roth 457 account, they won’t owe additional taxes
The DCP Roth 457 project and ongoing communication with employers
DRS partners with more than 1,000 employers across the state in the administration of DCP. We realize this change will impact how you set up deductions in your payroll systems and will require system changes. DRS is forming a project team in June 2022 to provide regular communication with all DCP-participating employers and communicate necessary reporting requirement changes as early as we can. The project will support employers through a successful implementation and adoption ahead of the anticipated rollout in late 2023. If you are a state agency employer, we want you to know we will be working closely with the HRMS team on this implementation.
We believe this is a positive change for DCP and will improve the retirement readiness and security for many of your employees.
Please complete this short survey (approximately five minutes) to share your interest in the Roth 457 option and give us your organization’s anticipated level of effort for modifying its payroll system.
If you have any additional questions, please contact Retirement Readiness Director, Seth Miller, at firstname.lastname@example.org.