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The Pension Protection Act of 2006 moved us one step closer to being able to inherit retirement plan money more effectively or to pass it on to heirs more efficiently.

This is important because there is now more than $3 trillion sloshing around in 401(k) plans. The last time I looked, toward the end of the 1990s, that number was $1.8 trillion.

If the stock market averages a 10 percent return, the rule of 72 would have this money doubling in 7.2 years. Add to this the annual contribution amounts of somewhere north of $200 billion, plus earnings, and we can see our way to $10 trillion in the not-too-distant future -- and more than $20 trillion about seven years after that.

Pardon me, but this feels like the equivalent of the "private accounts" that President Bush was so eager to substitute for portions of our Social Security program. We effectively have these accounts for anyone who cares enough about their retirement to use them.

The tax advantages of deductible contributions and tax-deferred compounding amount to a huge government subsidy.

Fortunately, the privatization of Social Security and its one-plus-one-equals-five arithmetic was dead in the water, and there went the dreams of the financial services industry, which, in published speeches by industry leaders, said they expected to charge three-tenths of a percent per year.

Those of us in the industry know that this would have represented a 90 percent profit, given a captive audience of "investors" and the current three-one-hundredths percent cost of administering accounts in large mutual funds in which no marketing or sales costs are involved.

Moreover, recent changes in the law are making it easier for heirs to inherit 401(k) money without crushing tax burdens -- another supposed feature of those "private accounts."

Spouses, of course, always receive the money tax-free, but nonspousal heirs such as children or friends only had, at best, the opportunity to spread 401(k) money over five years.

Bear in mind that the fundamental operating principle behind retirement asset taxation was that it was never intended to benefit anyone beyond the workers and their spouses.

The buildup of retirement plan assets was not intended to fund a government-subsidized family legacy.

Now, thanks to new laws, anyone inheriting 401(k) assets can roll them over into an individual retirement account and stretch the distribution payments out over his or her (presumably longer) lifetime.

With relatively small payments extracted from the account, the earnings can actually be greater than the annual minimum distributions. These "minimum distributions" have to be extracted from the plan so that the government gets to tax at least something.

From a practical standpoint, the beneficiaries of some money in a 401(k) could be grandchildren whose long life spans would call for minimum distributions that would be negligible. They could later use the money for college tuition.

True, they would have to pay taxes and a 10 percent penalty on some lump sums they removed years later for college expenses.

If they are not working, however, this would be their only income and therefore would be taxed at relatively low rates.

To open the window of opportunity for more creative estate planning with regard to 401(k) money, the employer's plan must be amended to specifically allow for this IRA rollover to a nonspouse beneficiary. The money must not be commingled with existing noninherited IRA assets.

This opportunity only applies to employees who died in 2006 or later. It is not retroactive. Check with your employer to see if he or she is considering any steps to effect this change. They have nothing to lose by adopting it.

In the meantime, consider revisiting your wills, trusts and 401(k) beneficiary designations. Your heirs may owe their future success to words of advice you can now give them. To wit: "Here's a million bucks. Don't lose it."

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