President Obama signed the Small Business Jobs Act on September 27, 2010. The Act includes provisions to provide support to small businesses and incentives to help them grow and hire. The Act includes one provision which impacts retirement accounts.

The new law authorizes 401(k), 403(b) and 457(b) governmental plans to allow participants to roll over qualified distributions into a designated Roth account within their plans. The rollover will be taxable, except for any after-tax contributions. The provision is effective for distributions after September 27, 2010. If an amount is rolled over in 2010, the income can be claimed in equal amounts on 2011 and 2012 tax returns, unless the taxpayer elects to claim the income in 2010. The ability to report income from the 2010 rollover in 2011 and 2012 echoes existing rules for converting a traditional IRA to a Roth IRA in 2010. Plans administrators need to move quickly. First, the plan must be amended to permit these rollovers. Then, participants must act before year-end on any qualifying distribution if they want to take advantage of either the two-year deferral into 2011 or 2012 or lower tax rates in 2010 (if Congress does not extend the 2001 individual marginal income tax rate reductions). One drawback, for many taxpayers, however, will be finding the cash to pay the income tax. Check with your plan administrator and your tax advisor before you make this decision.

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).