What Has Changed:

After 2001, individuals who receive distributions from tax-favored plans when they retire or otherwise leave an employer will have more flexibility to roll over their money into another tax-favored account and avoid current taxation of their distributions. Under the new law, eligible rollover distributions from tax-qualified plans, 403(b) annuities, and governmental 457 plans generally may be rolled over to any of these types of plans, assuming the plan accepts rollovers -or to an IRA. Rollovers of after-tax qualified plan contributions also will be permitted. More- over, taxable IRA amounts may be rolled over into a tax- qualified plan, 403(b) annuity, or 457 plan.

The Act also makes it possible for a surviving spouse to have distributions from a deceased spouse's plan rolled over to her or his own tax-qualified plan, 403(b) annuity program, or governmental 457 plan, assuming the plan accepts rollovers. The Impact: The new portability provisions are designed to encourage individuals not to spend their retirement savings prematurely. It's likely that many individuals will take advantage of the new rollover flexibility to keep their money in a tax-favored plan until they retire.

Strategies To Consider:

Investigate the new options available to you if you anticipate leaving your employer soon and will be receiving an eligible rollover distribution. If a desirable rollover option is not yet available, you may want to ask your employer if you can leave your money in the plan after you separate from service.