My current employer will likely begin offering employees a Roth 401(k)
option for 2006.  For the past two years, I have contributed the
maximum to the company's regular 401(k).  Beginning in 2006, I will be
on extended leave from the company while I complete a PhD.  So while I
am still an employee, I will be drawing no salary in the coming years.
 As such, now seems like a good opportunity for me to convert my
401(k) tax-deferred contributions to a Roth-type account, as I will be
in the lowest income tax bracket for the next several years.

Will I be able to move the contributions and earnings that I have
already made with the regular 401(k) to the Roth 401(k) - in a similar
manner to how one would move money from a Traditional to a Roth IRA
(including the fact that reallocated money would not be added into my
AGI)?

Please include any references, in particular IRS documentation or news
articles interpreting IRS documentation, used in answering this
question.

I'm interested primarily in whether or not such a reallocation can
occur, but also in any constraints on such an action (e.g. whether it
changes your AGI - thereby possibly pushing you into a higher tax
bracket - whether it depends on current salary, amount already in the
regular 401(k), etc.).

If you need any clarification about the question, don't hesitate to ask.  Thank you.

Save the fifteen dollars.  If you have a Roth contact your current
custodian or if you do not set up a Roth.  They will be able to advise
you about transferring the funds.

Thanks for the comment.  I have a Roth IRA, but Roth 401(k)'s do not
yet exist.  That's why the answer seems so hard to come by.  The
"custodian" of my regular 401(k) is the company my employer has chosen
to handle our benefits, and they have been of little help.  I'm
assuming that the 401(k) conversion (i.e. moving funds from
traditional 401(k) to Roth 401(k)) should mirror the conversion rules
currently in place for IRAs, but I'm looking for verification of this.

I am a consultant in retirement plans with 30 years experience.
Internal revenue code 402(a) describes the new Roth 401(k). The IRS
just last week issued proposed final regulations on this section of
the code. You are assuming that Congress treated the Roth 401(k) the
same as Roth IRAs. Unfortunately, there are differences and one is
that you cannot convert a tradional pre-tax 401(k) account to a Roth
401(k). This option just was not included in the enabling legislation.
You could effect what you want if you are able to request a
distribution from your 401(k) plan in the form of a direct rollover to
an IRA and after that IRA is created, convert it to a Roth IRA under
the IRA rules of IRC 408. Again unfortunately, since you are still
technically employed, you may not be eligible for a distribution from
your 401(k) plan. It is not lawful for a plan to allow distributions
of pre-tax 401(k) funds from a plan to participants during employment
prior to age 59 1/2 (except for certain hardships which are not
allowed to be rolled to an IRA anyway).  You will need to contact your
plan administrator (usually your employer) to find out if they
consider you to have technically terminated employment so that you can
qualify for a distribution. This is the only way you can do what you
want to do.