There have not been any Regs issued on this yet to my knowledge. Section 824 of the PPA appears to allow such direct Roth conversions of both after tax and pre tax dollars. The pre tax amounts would obviously be taxable, but not the after tax amounts. The 100,000 Roth conversion income limit continues to apply until 2010.

Another key is that you must be eligible for plan distributions under the plan document. This typically means having separated from service or having reached the age specified in the plan, usually 59.5. I see no reason why any pre 1987 after tax contributions separately accounted for by the plan could not be rolled over separately and tax free in accord with prior rulings. Post 1986 after tax contributions must be pro rated with pre tax amounts in the plan including any and all earnings in the plan.

In summary, you may have the option to:
1) Have only the pre 1987 after tax contributions transferred tax free to a Roth IRA.
2) At a later date have the remaining assets transferred which would include all the taxable amounts in the plan. This would obviously have the potential of inflating your tax bracket for the year just as in any taxable Roth conversion.
3) Or – combine the above with one total transfer, partially tax free.

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