Congress gives final approval to Roth 401(k) rollover bill

WASHINGTON—Employers could amend their 401(k) plans immediately to allow participants to roll over account balances into Roth 401(k) plan accounts under legislation that received final congressional approval Thursday.

Under H.R. 5297, approved on a 237-187 vote by the House of Representatives, participants eligible for a 401(k) plan distribution could roll over part or all of their account balance into 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 equal parts 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 participants' current and future tax bracket, the measure could reduce their tax liability.

The measure also would allow participants in Section 457(b) plans—the public sector's rough equivalent of 401(k) plans—to make contributions to Roth accounts effective next year.

The Senate last week approved identical Roth provisions, which are part of a small-business jobs bill.

President Obama said he will sign the bill on Monday.