Yes, beginning in 2008, you can make a rollover from a 401(k) plan (or other qualified employer plan, 403(b) plan, or governmental 457(b) plan) to a Roth IRA, as long as you meet certain requirements.

First, you must be entitled to a distribution from your plan. Generally, you can access your account when you terminate your employment. But, in some cases, you may also be able to make in-service withdrawals of your or your employer's contributions (for example, at age 59½). The terms of your plan control, so talk with your plan administrator or review your plan's summary plan description (SPD).

Second, your distribution must be an "eligible rollover distribution." In general, this is any distribution you receive from the plan that isn't a hardship withdrawal, certain periodic payments, or a required minimum distribution.

Third, you must meet income guidelines. You can roll over funds from a 401(k) plan to a Roth IRA only if your modified adjusted gross income is $100,000 or less (this dollar limit applies whether your tax filing status is single or married filing jointly). If you're married filing separately, you can't make a rollover at all. (These limitations will be repealed in 2010.)

You must include in gross income any amount that would have been taxed if the distribution had been paid to you, and not rolled over. But that's the price you have to pay to be able to receive tax-free qualified distributions from your Roth IRA in the future.

In most cases you should elect a direct rollover, where your 401(k) plan transfers the funds directly to your IRA. If instead the plan pays you, you'll have 60 days to complete the rollover, but your 401(k) plan will be required to withhold 20% of the taxable portion of your distribution.

Note: If you have funds in a Roth 401(k) or Roth 403(b) account, different rules apply. If you receive an eligible rollover distribution, you can generally make a tax-free rollover (direct or 60-day) of those funds to a Roth IRA without restriction.