Legislative Changes to PERAPlus 457 and Roth Plans Help Members Save More, Bring New Requirements for Employers
House Bill 26-1026 was passed during the 2026 legislative session and signed into law.
The new law requires all PERA-affiliated employers to:
- Offer the PERAPlus 457 plan to their employees, in addition to the currently required PERAPlus 401(k) Plan
- Include options for an employee to make tax deferred contributions and Roth contributions in both PERA’s voluntary PERAPlus 401(k) and PERAPlus 457 Plans.
- Make these new requirements available to your employees January 1, 2027
To make this transition as easy as possible for employers, PERA will forego the normal plan affiliation process and simply grant all agencies access to the new reporting options. In addition to this, employers will need to develop a process for employees to sign up for or change deferral amounts for the PERAPlus 457 Plan in the same fashion as the PERAPlus 401(k) Plan. Enrollment and deferral changes for the 457 Plan will no longer be performed through the Empower website and instead will originate through the employer, like the 401(k) Plan. This change will make enrollment and deferral changes consistent between both plans to simplify the sign up and election process for our members and minimize the effort of employers to implement the significant changes within their payroll systems. Colorado law requires that all employees have access to both plans and contribution options. As a result, all employers are responsible for having their own payroll systems set up to report contributions for both plans with the pre-tax and Roth deferral options by the implementation date of January 1, 2027.
What are the benefits to my employees?
Your employees will now have more options for retirement savings. They can select the plans that work best for their savings needs. Certain plans come with special catch-up provisions that are beneficial to employees looking to maximize savings before retirement. Additionally, employees will no longer have to make changes to their PERAPlus 457 deferrals with Empower and can follow the same process for changes to the PERAPlus 401(k) contributions. Contributions will be able to be changed in shorter timeframes as they no longer have to make these changes by the first of the month for the following month.
How does this benefit me?
You will receive enrollment information and be able to educate your employees much faster with this enrollment and reporting structure. The plan enrollment process will now be standardized between the different offerings. As a result of a federal change in the SECURE 2.0 Act, employees will now be able to request changes and you can implement the change as soon as administratively possible.
What is changing about how the plan is administered?
Similarly to how the PERAPlus 401(k) Plan is administered, you will need a system or program for employees to submit enrollment requests and changes to deferrals for the PERAPlus 457 Plan in your organization’s payroll office. This information will no longer be set up directly with Empower and you will no longer receive these deferral changes through STARS, you will be receiving them directly from your employees.
For agencies who do not have Roth currently established, you will need to set up programming within your payroll system to do post-tax contributions for those enrolled with the Roth options.
How do Roth options work?
Unlike traditional PERAPlus 401(k)/457 pre-tax contributions, Roth contributions are taxed before the money is contributed to the Plan. Any earnings on Roth contributions grow tax-free and distributions will also be free of federal (and where applicable, state and local) income taxes, provided they are qualified distributions. An important caveat is that Roth contributions and earnings cannot be used to buy DB Plan service credit. Additionally, if members were to roll over these funds in the future, the receiving plan would have to be able to accept Roth contributions.
What is the difference between the 401(k) and 457 plans?
While 401(k) and 457 plans are both forms of retirement savings accounts, they have slight differences that may be important for members to know when choosing which plan is right for them.
Early withdrawals are handled differently between the 401(k) and 457 plans. For the PERAPlus 401(k) Plan if you withdraw your account without rolling it over into another retirement account, you could face a 10% penalty for early withdrawal if you are under the age of 59 1/2 (unless you leave your job during or after the year you turn 55), in addition to paying income tax on the withdrawal. However, for the PERAPlus 457 Plan there is no penalty for early withdrawal, but you will still be subject to income tax on your withdrawal. Another important distinction is the difference in catch-up provisions. The PERAPlus 457 Plan has a special catch-up provision that may apply if you’re three years from retirement eligibility. If approved, you may be able to contribute up to twice the regular limit for that three-year period. The PERAPlus 401(k) Plan does not have this additional special catch-up provision.
See the PERAPlus 401(k) and 457 Plan Comparison chart for more information.
How do I report Roth (tax-paid) vs pre-tax contributions?
You will deduct the contribution after taxes have already been withheld, so this contribution comes from the net payroll amount not the gross. On the 401(k) and 457 contribution files, there is a column to report Roth contributions for your employees. You can submit 401(k) and Roth 401(k) contributions on the same report and you can report 457 and Roth 457 on the same report.
We have a 457 plan through another financial institution. Will we have to terminate that program?
No, you are not required to terminate relationships with other financial institutions. However, state law requires you to offer the PERAPlus 401(k), 457 and Roth options through PERA in addition to your other providers. If you are interested in more information, please contact the PERA Defined Contribution Team at 303-398-7665.
We’ve established our budget for the 2026-2027 school year, how should we factor this in?
PERA recognizes that this task can be daunting for some employers, but the new law is clear that all employers must participate. The PERA Employer Relations and Defined Contribution teams are available to train on these new programs as well as train on reporting the different types of contributions to PERA.
Are we required to offer all options to our employees?
Yes, you are legally required to offer all PERAPlus Plans and Roth options to your employees and you must report them correctly in the plan they enroll in. The employer is considered noncompliant if they refuse to offer one or more of the plans to their employees.
We know this may be a significant change for some employers. Additional updates will be provided leading up to the January 1 implementation deadline, and PERA is prepared to assist you with your information and operational needs.