WASHINGTON—Employers would be allowed to amend their 401(k) plans immediately to allow participants to roll over account balances into Roth 401(k) plan accounts under a bill the U.S. Senate passed Thursday.

The provision, tucked into a small-business jobs bill that the Senate cleared on 61-38 vote, would broaden the appeal of 401(k) plans by potentially reducing taxes that participants pay when they receive a distribution from the plan.

Under current law, employees make pretax contributions to 401(k) plans. Employee contributions, employer matching contributions and investment income are taxed when the participant receives a distribution, such as at retirement.

In a Roth 401(k), contributions are made after taxes have been taken out and distributions are not taxed.

Under the Senate-passed H.R. 5297, participants eligible for a 401(k) plan distribution could roll over all or part of their account balance to a Roth 401(k) plan offered by their employers. If the rollover is made this year, the participant could elect to pay the tax on the money in 2011 and 2012.

Once rolled over into the Roth 401(k) plan, the money would earn tax-free investment income and participants would not be taxed when they receive a distribution.

Depending on a participant’s current and future tax bracket, the measure could reduce their tax liability. For example, if tax rates increase in the future, participants who rolled over funds from a 401(k) plan to a Roth 401(k) and paid taxes now on the transferred amount would pay less in taxes than if they kept the money in the regular 401(k) plan and took a distribution later.

“We think this is a very exciting,” said Marina Edwards, a senior consultant with Towers Watson & Co. in Chicago. This would allow “tax diversification,” Ms. Edwards said, noting that 401(k) plan participants who are unsure about future tax rates and their future tax bracket could roll some of the money into a Roth 401(k) and keep the rest in the traditional 401(k) plan.

While 401(k) plan participants can roll over distributions to Roth individual retirement accounts under current law, the fees charged by mutual funds offering Roth IRAs usually are higher than fees on funds offered in 401(k) plans.

“This is a big step forward in leveling the playing field between employer-sponsored plans and IRAs when it comes to Roth conversions, and helps employees enjoy lower fees for their converted Roth balances,” said Frank McArdle, a consultant with Hewitt Associates Inc. in Washington.

The House has not yet acted on the proposal.