Just when you thought you knew the retirement plan rules, they’re changing again.

It is becoming increasingly more common for Congress to make significant changes to the laws that govern most types of retirement plans.

Not too long ago, the retirement plan lingo did not include SIMPLE, automatic enrollment, Roth or even catch-up, all terms that are common today. For the longest time, aside from minor changes here and there, the rules stayed the same. For example, most individuals knew that the annual Individual Retirement Account contribution limit was $2,000 and that, for the most part, the only way an individual could make his or her own contributions to an employer sponsored plan was for that plan to be a 401(k) or 403(b) plan.

Over the last seven or eight years, each year seems to bring substantial changes to the options available to make contributions and to how much can be contributed to retirement plans. Fortunately, the changes to the retirement plan rules have been favorable and have enabled individuals and employers to set aside more money for retirement. One reason may be that, aside from owning a home, most individuals’ largest asset is the account balance or benefits provided through a retirement plan sponsored by an employer. In most cases, it is up to the individual themselves to save for their own retirement and most do so through a 401(k) plan or similar option.

Recently, the Pension Protection Act of 2006 was passed by Congress and signed into law by President Bush. Some of the provisions are effective in 2006 while others are effective in 2007 and 2008.

In addition to making substantial changes to the way defined benefit plans will be funded in the future and making permanent some of the more recent defined contribution plan changes (e.g., higher employee contribution limits, including catch-up contributions), the act makes other very favorable changes that most individuals should find useful. The changes to the rules are intended to encourage individuals to save more money for retirement and to preserve the money that has already been saved.

With respect to IRAs, for a limited time, older IRA holders may make tax-free distributions that go directly to a charity. In addition, the rules have been changed to allow individuals to elect to have federal tax refunds paid directly to an IRA. Individuals will also have the ability to roll over balances from a 401(k) plan directly into a Roth IRA, something that is not permitted currently. A non-spouse beneficiary will also be permitted to rollover benefits from an employer sponsored plan into an IRA. Finally, the adjusted gross income limits that determine if an individual can make deductible contributions will also start being indexed for inflation.

With respect to qualified retirement plans such as 401(k) plans, the new rules encourage employers to implement automatic enrollment provisions that, unless an employee chooses otherwise, require minimum salary reduction contributions to be made by employees which can be automatically increased each year. The act also enables an investment advisor to provide advice to individual plan participants, as long as certain requirements are met.

It seems reasonable to conclude that Congress is quite concerned with individual retirement savings and that the changes contained in the Pension Protection Act of 2006 will be old news in a very short time. However, the continuous changes to the retirement plan rules are generally good news for individuals and employers.

William G. Enck is a senior manager in Berry, Dunn, McNeil & Parker’s Retirement Planning Services Group in Portland.