President Obama signed the Small Business Jobs Act of 2010 (P.L.
111-240) into law on September 27, 2010. The Act makes
several important changes to the way retirement plans
administer Roth contributions for 401(k), 403(b) and governmental
457(b) plans.
In-Plan Roth Conversions
The Act changes the rules for 401(k) and 403(b) plans (and
457(b) plans in 2011) to permit in-plan Roth conversions. An
in-plan conversion is accomplished through a direct rollover of
amounts from a non-Roth account to a Roth account within the plan,
instead of a rollover to a Roth IRA. The in-plan Roth
conversion provision is optional and applies to plans that allow
participants to designate contributions as Roth
contributions. This new rule is effective now for employees
who are eligible to receive a plan distribution, for example, if
they have terminated from employment or the plan permits
distributions upon attainment of age 59-1/2.
