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U.S. workers willing to take tax pain today in exchange for tax-free gains on earnings in their 401(k) retirement accounts later have a new avenue to do so.

The budget legislation passed by Congress on Jan. 1 lets 401(k) participants convert any money in their tax-deferred accounts to a so-called Roth 401(k) account, if their employer offers one, which can be withdrawn tax-free in retirement.

The change is projected to raise $12.2 billion in revenue over 10 years, according to the Joint Committee on Taxation, and help defray the cost of delaying spending cuts that had been set to take effect this month.

“This dramatically expands the number of participants who can use this provision,” said Bob Holcomb, executive director of legislative and regulatory affairs for JPMorgan Chase’s retirement-plan services. “It will allow any amount to be transferred.”

The conversion opportunity can benefit people with significant balances, the upfront money to pay taxes now with funds outside their retirement account and years of tax-free earnings ahead of them or their heirs. Conversions to Roth 401(k)s had been limited to certain funds and to plans that allowed the switches. The law opens the opportunity to more workers who hold $5 trillion in employer-sponsored defined contribution plans including 401(k)s.

Contributions to a traditional 401(k) account are tax-deferred, with taxes paid at ordinary income rates when the money is withdrawn in retirement. When savers put money into a Roth 401(k) account, they pay taxes on the money upfront in exchange for tax-free withdrawals later.

The new conversion opportunity may help wealthy investors who want to leave their retirement accounts to heirs and younger savers, said John Olivieri, a partner in the private clients group at New York-based law firm White & Case.

“This is really a huge benefit to heirs,” Olivieri said. “Basically you can pay tax now for your kids.”

Younger investors may wish to convert a portion or all of their account if it’s a small part of their net worth because they have more time to make back the money they lose in paying the tax upfront, Olivieri said.

A provision in a 2010 law allowed some 401(k) participants to convert part of the money in their plan to a Roth 401(k) account, with restrictions: Their employer had to offer a Roth 401(k) and allow conversions.

Funds transferred were limited to money eligible for distribution, such as that held by savers age 59½ and older, and some employer contributions, said Alison Borland, vice president of retirement solutions and strategies at Aon Hewitt.

It is a unit of Aon that administers 401(k) plans for about 5 million workers.

“Now they are saying you can convert any money,” said Ed Ferrigno, vice president of Washington affairs for the Plan Sponsor Council of America.

The Chicago-based group represents about 1,000 employers that sponsor plans and lobbied for the 2010 law change as another way for participants to diversify their savings, Ferrigno said. The budget legislation may encourage more employers to offer Roth 401(k) accounts, even as questions remain about the logistics, he said.

The scope of possible conversions may be smaller at the start for 401(k) plans because only about half of employers in 2011 offered Roth accounts in their plans and most of those didn’t allow conversions, according to Vanguard.

Fewer than 2 percent of plans administered by Vanguard have opted to allow Roth 401(k) conversions and about 500 participants have taken advantage of the move since the 2010 legislation, said Jean Young, senior research analyst at Vanguard’s Center for Retirement Research.

“The thing to keep in mind is that when people do that type of conversion they have to pay a tax,” Young said.

“When they realize they have to pay the taxes they tend to back off.”