The Washington State Deferred Compensation Program (DCP) is a supplemental tax deferred savings program under section 457 of the federal Internal Revenue Code (IRC) offered to state employees and to the employees of local governments that elect to participate in the program. It is administered by the Department of Retirement Systems (DRS) which contracts with a vendor for record-keeping and other administrative services. Local governments may choose to offer DCP to local government employees, and are also authorized to offer deferred compensation programs to their employees through vendors other than through the DCP.
Plans operated under section 457 of the IRC by local government employers and in other states allow members to make after-tax contributions, referred to as Roth contributions. The principle and earnings from Roth contributions are not taxed when a member makes a qualified distribution from the plan. DCP offered by DRS does not include the option of making Roth contributions.
The Washington State Investment Board (WSIB) is responsible for establishing investment policy; developing participant investment options; and managing investment funds of the self-directed retirement and savings programs, including the selection and monitoring of investment options offered to DCP participants. In making these decisions it acts as a plan fiduciary.
DRS must offer a Roth option as part of the DCP beginning no later than December 1, 2023.