by Last Night in Little Rock

Yesterday, President Bush signed into law a 907 page pension law that has a little known proviso: Anyone can inherit a 401(k) without paying taxes on it. Before, only spouses could do so. The LA Times has the story today:

A little-noticed provision in a pension law signed Thursday by President Bush will for the first time allow anyone to inherit a 401(k) nest egg without immediately paying taxes on the windfall, a benefit that in the past was reserved for spouses.

Gay advocates and other observers described the measure as a significant shift in how the government treats domestic partners who are not married, even though the provision was not written specifically for same-sex couples.

With this change, Congress is acknowledging that improvements can be made to our laws that address financial inequities and impediments that same-sex couples face," said James M. Delaplane Jr., an attorney and specialist on pension benefits. "There's no doubt about it."

The legal change is an obscure element in a new 907-page law affecting pensions and workplace-based retirement accounts. Proponents of the overall package hailed it as a long-sought effort to stabilize a system of retirement benefits that has grown porous. Many traditional pension plans are teetering on a base of shaky funding, and many companies are cutting back on future commitments.

"Americans who spend a lifetime working hard should be confident that their pensions will be there when they retire," Bush said as he signed the Pension Protection Act of 2006.

The obvious intent was to remove tax penalties and enable 401(k) holders to pass the corpus to anyone they wanted. Congress knew exactly what it was doing. This was in the works for three years.