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Roth 457 FAQs

Roth 457 FAQs

Reporting changes related to the Roth 457 option 

  • Beginning Aug. 25, 2025, employees will have the option to save money in a Roth 457 account along with or instead of the standard (pretax) 457 account. Your RU will report these changes along with any other changes to DC contributions. By that date, your payroll system must be capable of submitting Detail 4 – DC Contributions (DTL4) records in the updated format that includes fields for the Roth accounts. (See the DTL4 file layout and footer layouts, also available on the State of Michigan Roth 457 Accounts page on the Employer Information website.)
  • The DTL4 record will include four new fields: DC Roth amount, DC Roth %, PHF Roth amount, and PHF Roth %. You can preview the changes to the Reporting website (coming soon) to understand these changes better.
  • Yes. When there was only one account option for member contributions, we referred to it as Member DC contributions or Member PHF contributions. These contributions have always gone into the member’s 457 account. Now that there are two options, the Member DC contributions or Member PHF contributions refers to the standard (pretax) 457 account. Roth DC and Roth PHF refer to contributions that go into the member’s Roth 457 account.
  • If an employee is contributing only to the Roth 457 account, the first 2% should be reported in the Roth PHF fields (amount and percentage). If an employee is contributing to both account types, the first 2% should be reported in the existing PHF fields (amount and percentage).
  • The information will be in your DC Feedback file, just as it is now. That file and related sections of the Employer Reporting website will have new fields once this change is in place. You can preview the changes to the Reporting website (coming soon) to understand them better.
  • When an employee changes their contribution percentage or account type, the change will appear in your DC Feedback file the next business day. On the DC feedback file, the column labeled Effective Report End Date shows when ORS expects those changes to take effect. See RIM section 7.04.01: View DC Feedback File.
  • Check the messages at the bottom of the Employer Reporting webpage. When your RU has members on the DC Feedback file, you’ll see a message there letting you know. In addition, each RU should view the DC feedback file once a pay cycle to check for changes. See RIM 7.04.01: View DC Feedback File. This will be especially critical for the first few months after Aug. 25, 2025.
  • Yes. You can preview the changes to the Reporting website (coming soon) to understand these changes better.
  • Yes. When the employee is contributing to both the standard 457 and the Roth 457, both percentages are considered, and if total contributions are less than 15% total, the employee would be included in Small Steps. If a member is contributing only to the Roth 457 account, we would increase it by 1%. If they’re doing a mix of the two types, their contributions to the standard 457 will increase by 1%.

DC contributions and account types

  • For MPSERS members with the DC Plan or a savings (DC) component, employer contributions go into the member’s 401(k) account. For all employees, member contributions (or deferred compensation for members in a defined benefit plan) go into their 457 account. Beginning Aug. 25, 2025, employees will have the option to direct some or all their member contributions or deferred compensation into a Roth 457 account instead of the standard (pretax) 457 account.

  • Contributions to a standard 457 account — which was all member DC contributions until this change — are withheld from the employee’s pretax earnings. Contributions to a Roth 457 account are withheld from the member’s post-tax earnings. It’s important to report the information as shown in the DC Feedback file so that contributions come from the correct part of the employee’s pay (pretax or post-tax dollars).
  • Money withdrawn from a 457 account (subject to the IRS rules regarding retirement accounts) is subject to income tax in the year it is withdrawn, typically years after it was directed to the account. Money withdrawn from a Roth 457 account is not subject to income tax at withdrawal, nor are the investment earnings on those savings. For some people, paying the income tax on the earnings now makes more sense from a tax perspective.
  • No. For the MPSERS plan, employers can’t contribute directly to an employee’s Roth 457 account. Employer contributions go into the member’s 401(k) account.

Roth 457 accounts from an employee’s perspective

  • Members will be able to enroll in the Roth 457 plan beginning Monday, Aug. 25, 2025. Voya Financial will send information to MPSERS employees shortly before they’re able to enroll. We’ll share that information on the State of Michigan Roth 457 Accounts page of our website, under the heading Member communications.
  • The employee will make changes to their State of Michigan 401(k) and 457 Plans account type through Voya. When we send information to MPSERS employees, we’ll share that information on the State of Michigan Roth 457 Accounts page of our website, under the heading Member communications.
  • Yes, employees can convert money from one account to the other, and they would handle that through Voya, using a form. They will have to pay taxes on the contributions being converted from a 457 account to a Roth 457 account. Employers are not involved in that process; they are responsible only for contributions from the member’s current earnings according to the employee’s election, which will be shown in the DC Feedback File.
  • All employee contributions are under the same limit.
  • New MPSERS members are automatically enrolled in the standard 457 (pretax) account. When they’re first reported, they receive a welcome packet with information about their retirement plan election, including instructions for accessing their State of Michigan 401(k) and 457 Plans (Voya) account. At that point, they can log in and change their DC contribution rate or enroll in the Roth option. These changes will be shown in the DC Feedback file, so RUs should use the rates shown there.