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Board begins review of adding Roth 457 option; staff awaiting Treasury guidance under Secure 2
Summary
Board members asked staff to investigate adding a Roth contribution option to the city’s 457/401-style plans. Staff said a placeholder for Roth language is in plan documents for Jan. 1, 2026, that system work has begun, and that the board is awaiting Treasury guidance related to Secure 2 before final implementation steps.
A board member asked the Oklahoma City Deferred Compensation Board on March 3, 2025, to investigate allowing Roth contributions in the city’s 457 plan. Board members discussed the difference between Roth and traditional (pre-tax) contributions and noted the need for further legal and systems work before implementation.
A speaker who described the tax mechanics explained that a Roth option allows participants to contribute after-tax dollars that grow tax deferred and can be withdrawn tax-free in retirement, in contrast to traditional pre-tax contributions that reduce current taxable income but are taxed on withdrawal. The presenter said this topic involves plan-design, Internal Revenue Service and payroll questions and is not solely an administrative decision.
Staff said they have begun preliminary reviews and system work to add Roth language to plan documents with an effective date of Jan. 1, 2026, anticipating provisions in the SECURE 2 legislation. However, staff cautioned that Treasury guidance on Secure 2 provisions — including a required Roth catch-up provision beginning in 2026 — had not yet been published and that final steps should wait for that guidance.
Retirement system staff said they will continue system preparations (including payroll/Oracle work) and bring additional information back to the board when Treasury guidance is issued and more legal clarity is available.
