Business Insurance reported that the Roth provision, contained in the Small Business Jobs and Credit Act of 2010 (HR 5297), was approved on a 61 to 38 vote.
According to a statement put out after the vote by one retirement services trade group, the American Society of Pension Professionals & Actuaries (ASPPA), the provision permits participants to take advantage of Roth conversion rules without forfeiting the protection and advantages of an employer-sponsored retirement program.
ASPPA pointed out that under current law, the Roth conversion can only be accomplished by moving the assets out of the plan with income tax on the transferred amount typically paid in the year of conversion. A special rule allows tax on amounts converted in 2010 to be deferred until 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.
“ASPPA has worked closely with several members on the Roth conversion provision and applaud the Senate for recognizing how this key change will preserve retirement savings,” said ASPPA Director/CEO Brian H. Graff, in the statement. “We urge the House to pass the Small Business Jobs and Credit Act of 2010.”