Deferred Compensation: Roth Account

• A Roth deferred compensation account allows you to make after-tax contributions that grow tax-free and access qualified withdrawals that are tax-free when you retire. 
• Unlike traditional deferred compensation accounts where money is taxed on withdrawal, Roth contributions are taxed now, and qualified distributions in retirement are not taxed.

Your Roth deferred compensation account withdrawals in retirement are tax free if:

• You have had the account for at least 5 years, and
• You are at least 59½ years old or disabled (or in case of death, monies are available to your beneficiaries)
• While employed, your withdrawal options are limited but may be available in certain cases, such as unforeseeable emergencies or after age 70½.

If the requirements for a qualified distribution are not met, and the assets are not rolled into another eligible plan, the earnings portion of any distribution will be taxable.

• Contact a deferred compensation plan representative to enroll in deferred compensation paycheck contributions at any time during the year.
• Starting January 1, 2026, you can open a Roth deferred compensation account. Contributions to Roth accounts are made on an after-tax basis and will not reduce your taxable income for the year unlike pre-tax contributions.

• Consider your financial situation, including your current and expected income tax brackets in retirement.
• Roth accounts may be appropriate if you expect to be in a higher tax bracket in retirement, allowing you to pay taxes on the contributions now, at a lower tax rate, and receive tax-free distributions in retirement.
• Roth accounts may also work well for younger workers, who are usually in a lower tax bracket now than later in their careers. You may not make large contributions but have many years before retirement, so the compounding of investment returns, tax free, can add up to a substantial sum in 20 or 30 years.
• Depending on your finances and savings goals, you may want to use both pre-tax deferred compensation

No, this is employee funded. The County does not contribute to deferred compensation accounts.

A Roth IRA is an individual retirement account that you open while a Roth deferred compensation plan is employer-sponsored and has different contribution limits, eligibility, and access requirements.

The limits, set by the IRS annually, are the same for a pre-tax or Roth after-tax deferred compensation account. See Deferred Compensation Contributions.

Yes, but if you convert an existing deferred compensation account to a Roth account, you’ll owe tax on the converted amount. So, if you have a substantial amount of money in that account, the conversion could trigger a high tax bill, which is why it’s important to do your homework and consult with a financial advisor before you make a move.

The new requirement impacts high wage earners. As of January 1, 2026, the Roth catch-up contribution requirement specifies that employees who earned $145,000 or more in the previous year must have their deferred compensation catch-up contributions treated as after-tax Roth contributions, not as pre-tax contributions, per federal law. Impacted employees will be contacted directly.