On September 27, 2010, the President signed into law the Small Business Jobs Act of 2010 (the Act). The Act includes two provisions involving Roth accounts. The first provision allows plans to permit distributable portions of 401(k), 403(b), and governmental 457(b) account balances to be converted to a Roth account within the plan. Notably, for plans to permit conversions within the plan, there must be a qualified Roth contribution program in the plan. A plan does not need to require the transfer to a Roth IRA for a conversion. Participants who convert in 2010 have the option to split recognized income between 2011 and 2012. This provision is effective for distributions made after the date of enactment of the Act.
The second provision permits participants in governmental section 457(b) plans to treat elective deferrals as Roth contributions effective for taxable years beginning after December 31, 2010. Deadlines for any necessary plan amendments have not been announced.