You must complete the rollover by the 60th day following the day on which you receive the distribution. For information on distributions which qualify for rollover treatment, refer to Tax Topic 413, Rollovers from Retirement Plans. For information on the Direct Rollover Option, refer to Chapter 1 of Publication 590, Individual Retirement Arrangements (IRA's). To qualify for an automatic waiver or to obtain a waiver of the 60 day rollover requirement see " Retirement Plans FAQs relating to Waivers of the 60-Day Rollover Requirement.

New update  for 2010-
Roth IRAs and rollovers. Beginning in 2010, regardless of your income or filing status, you can roll over to a Roth IRA your traditional IRA, SEP-IRA, SIMPLE IRA or an eligible rollover distribution from your employer-sponsored plan. Also, a special 2-year option will apply for rollovers to Roth IRAs in 2010 only. You have the option of reporting the taxable portion of your rollover in your gross income for 2010, or reporting half in 2011 and half in 2012. For additional information on rollovers, see Publication 590, Individual Retirement Arrangements (IRAs).

You can roll funds from a 401(k) to an IRA to be able to take a penalty free distribution to purchase your first home if:

Your plan administrator is required to notify you before making a distribution from your 401(k) plan whether that distribution is eligible to be rolled over into an IRA. Note that funds rolled from a 401(k) to an IRA are generally subject to federal income tax withholding at a 20% rate unless the funds are rolled as a direct rollover to the IRA.

To see if you qualify for a distribution to be used as a first-time homebuyer, refer to Chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs).