Retirement Rollover Flexibility Act: New Rules Let You Move Roth IRA Cash Directly Into Your 401(k) Tax-Free

If you’ve ever changed jobs and ended up with retirement savings scattered across a former employer’s 401(k) and a couple of IRAs, you know the headache of consolidation. The Retirement Rollover Flexibility Act aims to smooth out one specific, frustrating wrinkle for people using Roth accounts.

This bill, under Section 2, creates a new lane for moving money you’ve saved in a Roth IRA directly into a designated Roth account within your current workplace plan—like a Roth 401(k)—without triggering any taxes or penalties. Right now, moving money from a 401(k) to an IRA is easy; going the other way, especially with Roth funds, has been complicated. This change is really about administrative cleanup, letting you put all your tax-free retirement eggs in one basket if that basket happens to be your current employer's plan.

The Fine Print on Flexibility

This isn't a free-for-all, though. The bill sets up specific guardrails for this tax-free transfer. To qualify, the Roth IRA must be considered an "eligible Roth IRA." This means two things (Section 408(d)(3)): first, it must be the only Roth IRA you maintain (excluding any that were set up just to receive a workplace rollover). Second, its balance at the time of transfer can’t exceed a specific limit tied to existing rollover rules. This suggests the rule is primarily designed to help people consolidate smaller, stranded Roth IRA accounts.

Critically, the transfer must occur as part of an "automatic portability transaction." While the bill relies on existing, complex IRS definitions for this term, the practical takeaway is that this flexibility is aimed at streamlining the process when funds are moving automatically, often when accounts are small. For the average person, this means if you have a small Roth IRA from an old job, this bill makes it easier to sweep that money into your current, active 401(k) Roth account.

Keeping Your Tax Clock Ticking

One of the biggest concerns when moving Roth money is protecting the five-year clock. For Roth accounts, you need to have held the account for five years before your earnings can be withdrawn tax-free. If you roll money into a new account, you don't want the clock to reset.

Section 402A addresses this directly. When funds are rolled over from a Roth IRA into the workplace plan, the bill ensures that the money keeps its status as after-tax contributions—what the IRS calls an "investment in the contract." More importantly, for the five-year rule, the bill adds a provision that lets the clock start ticking from the first taxable year you contributed to the original source plan (Section 402A(d)(2)(B)). This is a huge win for flexibility, meaning you don't lose valuable time toward tax-free withdrawals just because you consolidated your accounts. If you started contributing to that original 401(k) in 2018, that's the date that sticks, even if you move the money in 2024.

Ultimately, this bill doesn't change what you can save or how much, but it makes the logistics of managing your retirement savings much cleaner, especially if you’ve accumulated small, separate Roth accounts over the years. It’s a good example of policy catching up to the reality of modern, mobile careers.