I can’t usually get too excited by Acts of the government. Usually they seem to benefit the wealthy or our straight counterparts who can marry and tap into the related tax and financial benefits afforded them. This one caught my attention, however because it has a direct impact on gay and lesbian couples.

The Pension & Protection Act of 2006 (PPA) was passed by Congress and signed into law on August 17, 2006. The primary focus of the PPA was to help strengthen the nation’s pension insurance system. The reason this was necessary is because of the change from pensions that were primarily defined benefit systems (you get $X when you retire and it is funded solely by the employer) to defined contribution systems (think 401K: you contribute $X over time and are not guaranteed what that may look like in the future). The reason for the switch is the latter is certainly far less burdensome on companies and it shifts the burden of responsibility to the employee (both in terms of funding it and managing it wisely).

While this primary focus is well and good, where the gold lies for gays and lesbians is within the other changes made within the PPA. The PPA allows for individuals to transfer retirement assets to a nonspousal beneficiary when they die. This means that instead of your partner having to withdraw all the funds at your death and get hammered with taxes, they can roll the funds over into other retirement vehicles. This is a big deal because no longer will the surviving partner be forced to take a lump sum distribution and potentially get thrown into a higher tax bracket. These are little benefits our married counterparts take for granted but for which we should now rejoice. The most important key here is to ensure your retirement assets have up to date beneficiaries on record. I repeat — get out there and fill out those beneficiary forms and keep them up to date! Otherwise, you will lose out on the benefits and cause your partner great distress at an already distressing time.

The other boon in this law is that it offers gays and lesbians the ability to tap their retirement assets in the case of a qualifying emergency or financial hardship. In the past this was only available to spouses.

Consult your tax accountant and attorney for how it affects you personally. Meanwhile, you can read up on the details at these related links:

Fact Sheet
HRC Estate Planning Discusses PPA
Lambda Legal
IRS FAQ on Pension Plans