The Pension Protection Act passed in August will make some significant improvements in retirement plans including automatic enrollment and the ability for a non-spouse to rollover an inherited plan into an IRA.

The new act  will also have have a big impact on lump sum distributions and may actually reduce the amount you'll be allowed to move to an IRA from your defined benefit pension plan.  This act has actually changed the calculation of this lump sum.

Companies calculate this by taking the monthly payment the retiree is entitled to. They then figure how much this is worth as a lump sum in today’s dollars, making certain assumptions about life spans and future investment returns.

Under the new law, companies starting in 2008 will be able to assume a higher investment return, using a corporate bond interest rate instead of the lower Treasury bond rate previously used. This change produces a smaller lump sum payment. That’s because the higher rate represents the return an employee would have to earn to generate the same retirement income as if he were receiving the pension as a monthly paycheck.

This change will be phased in gradually over five years, and people who retire in the next year will see little impact on their payout.

The Kansas City Star explains.