Legislation Pending to Permit 401(k) Rollovers to Roths

A new Senate proposal would allow certain employees to roll over amounts from their (401)k retirement plans to a Roth savings account.

According to a draft copy of the bill obtained by Dow Jones Newswires, it would allow the rollover of amounts in a 401(k) retirement plan of otherwise permissible distributions to a Roth-type account in the same plan. Dow Jones noted the provision would help employees who are 59 1/2 years old or older, and who want to keep their savings in their current retirement plan but would like to convert it to a Roth-type account.   

The Senate expects the provision to raise $5.1 billion to help pay for roughly $12 billion in tax incentives aimed at spurring small business growth, because people taking advantage of the rollover will owe taxes on tax-deferred amounts that had been accumulating in their 401(k) plans.   

The provision is part of a package of small business and savings incentives that will likely face a Senate procedural vote this week, according to the news report.