Soon you may be able to roll over your 401(k) or 403(b) to a Roth inside your employer plan. By Mary Beth Franklin, Senior Editor November 3, 2010 If you have been wishing you could convert some or all of your retirement savings to a Roth IRA -- and enjoy tax-free withdrawals in retirement -- but your money is tied up in your employer’s plan, you may be in luck. A new law allows participants in employer-provided 401(k) and 403(b) plans to roll over their savings to a Roth 401(k) account within their plan. You don’t have to cash out your investments; you can simply transfer your assets to the new account within your plan. But employers must amend their plans to allow the transfer, and they are not required to do so. Even if your employer amends its plan to allow Roth conversions, the amount you can transfer may be restricted. Only those workers who are 59½ or older can convert all of their traditional 401(k) or 403(b) plan to a Roth. Younger employees can convert only employer contributions; they cannot convert their own employee contributions. You have to pay income taxes on the entire amount you convert (except for any after-tax contributions).The same law authorizes 457 retirement plans, used by state- and local-government workers, to start offering a Roth option next year. Figuring the tax bill. If you have both before-tax contributions (the most common type) and after-tax contributions (unusual, but possible) in your retirement account, you would pay tax only on the portion that represents your pretax contributions. But you can’t separate out the contributions and convert only the after-tax money. Say you have a $50,000 balance in your 401(k) plan and $10,000 came from after-tax contributions; you would have to pay taxes on four-fifths, or 80%, of any amount you convert. If your employer adopts the new provision by year-end, you could take advantage of a one-time option that allows taxpayers to spread the tax bill over two years. If you convert to a Roth this year, you may report half of the amount on your 2011 tax return, due in April 2012, and the balance on your 2012 return, due in 2013, paying taxes at whatever rates are in effect at that time. Or you could pay all of the tax on your 2010 return, which may be an attractive alternative for higher earners who fear that their tax rates will rise next year if the Bush-era tax cuts expire. But you don’t have to decide until you file your taxes in April, and by then, it should be clear which tax rates will apply. Caveat: Unlike a Roth IRA conversion, which you may undo if the account value declines, a switch to a Roth 401(k) cannot be reversed.