A deferral plan under IRC Sec 401(k) (including the Thrift Savings Plan), 403(b) or 457(b) governmental plan can have Roth accounts that allow participants to save on a Roth basis. That is, they can make after-tax contributions to the plan and all the principal and earnings are tax-free when distributed. Plans initially were able to allow participants to convert their pre-tax accounts to Roth accounts, but only with respect to money they had a right to take out of the plan, usually because they had reached age 59½ or separated from service.

The American Taxpayer Relief Act (ATRA) of 2012 expanded eligibility for conversions by allowing any amount in a non-Roth account to be converted to a Roth account in the same plan, whether or not the amount is distributable. The amount converted would be subject to regular income tax. This provision was put in the law as a money-raiser, with over $12 billions of additional tax projected to be collected from taxpayers taking advantage of the liberalized conversion rules in the 10 years after enactment.