Even as the recent national election was ramping up late last summer, Congress passed and the President signed the Pension Protection Act of 2006. Billed as a great boon to most workers, the Act may not have nearly the advertised effect—primarily because of a continuing shift away from traditional "defined benefit" pension plans and toward "defined contribution" retirement arrangements. Still, there are a number of items every worker should know about—particularly those invested in IRAs and 401(k) plans.

The new law may actually accelerate the trend away from defined benefit retirement plans. Because it requires companies to use stricter accounting standards in calculating the amount of money required to fully fund such plans, many analysts predict that more employers will review their existing plans and instead move toward pension plans that create a separate account for each worker, with no guarantee of retirement income levels.

For those with existing 401(k) and IRA retirement accounts, however, the new law provides a small handful of new options. Among the benefits offered to those workers and their beneficiaries:

• Even before the new law you could withdraw money from an IRA or Roth IRA, then make a charitable gift and deduct the gift for income tax purposes. You might not, however, be able to deduct the entire gift—meaning you would pay taxes on income that you are giving away. The new law lets you give instructions for a distribution directly from your IRA or Roth IRA to a charity with no tax effect at all, ensuring that you get the entire benefit of the charitable gift. Two limits: the maximum amount you can direct to charity is $100,000, and you only have tax years 2006 and 2007 to make the gift.
• If you are the beneficiary of an IRA, 401(k) or other qualified plan, you can direct that the plan’s contents be rolled over into an "inherited" IRA. That means you will not be stuck with the plan’s rules about distributions (some plans do not allow withdrawals over your life expectancy, for instance, even though the tax laws permit such "stretch" distributions).
• The Treasury Department has been ordered to issue new, liberalized rules on hardship withdrawals from 401(k) accounts. The new rules should make it easier to withdraw money for the benefit of not only the account owner, but also persons listed as beneficiaries under the plan.
• It will be easier to roll 401(k) money over into a Roth IRA—though the tax will still have to be paid in the year of the conversion. Under old rules, the rollover required two steps (401(k) to IRA, then to Roth IRA).

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