New Legislation Allows 401(k) and Other Plans to Offer In-Plan Roth Rollovers


On September 27, 2010, the Small Business Jobs and Credit Act of 2010 (H.R. 5297) (the “Act”) was signed into law. Sections 2111 and 2112 of the Act introduce two new changes allowing for the treatment of pretax contributions as in-plan Roth contributions. The first allows eligible 401(k), 403(b), and 457(b) (collectively, the “Eligible Plans”) plan participants to roll over Eligible Plan distributions into designated Roth accounts within the same Eligible Plans, effective immediately. The second change permits participants under eligible governmental 457(b) deferred compensation plans to treat elective deferrals of compensation as Roth contributions, effective January 1, 2011.


Prior to the passage of the Act, certain individuals who wished to roll over eligible amounts held in non-Roth accounts into Roth accounts could either: (i) roll over a traditional IRA into a Roth IRA; or (ii) roll over amounts from an Eligible Plan into a Roth IRA. As of January 1, 2010, individuals with adjusted gross incomes of more than $100,000, who were once ineligible to make a rollover, became eligible to participate in such rollovers as well.

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