(MONEY Magazine) – A "good bill." That's how President Bush described the 1,304-page Pension Protection Act as he signed it into law in August. With all due respect, though, a better description would be "a mixed bag." Retirement savers will find a lot to like in the new rules. But far from protecting traditional pensions, the bill may actually speed their decline. We read the law with a skeptical eye and pulled out what you really need to know. (Don't mention it.)

TAX BREAKS FOR YEARS Today's high IRA and 401(k) contribution limits had been set to expire in 2010. The new law makes them permanent. Now you can stash up to $15,000 in your 401(k) tax-deferred--up to $20,000 if you're 50 or older. Same with IRAs: Today's $4,000 contribution cap, plus an extra $1,000 if you're over 50, won't go away in 2010. In fact, beginning in 2008, all these limits (except the $1,000 extra in IRAs) are set to rise yearly with inflation.

The law also preserves the special status of 529 college savings plans. You can now save for kids' college costs without fear that the 529's best tax break will vanish in 2010.

COMING TO A 401(K) NEAR YOU The new law encourages employers to enroll workers automatically in 401(k)s, and most companies will start doing so in the next few years, predicts David Wray, president of the Profit Sharing/401(k) Council. Once automatically enrolled, you might also see your savings rate lifted automatically--from, say, 3% of salary at first to 6% in year four. If you prefer to make these calls yourself, don't worry. You can overrule the auto-pilot features at any time.

OTHER NEW 401(K) OPTIONS The law green-lights the Roth 401(k), which offers a tax break that's the mirror image of that in the regular 401(k): You pay taxes on the money you contribute but none on the money you take out, which makes sense if you think your tax bracket will be flat or higher in retirement. But a Roth 401(k) is costly to administer, so only a very few large companies are considering it.

Also, if your employer offers company stock as a 401(k) investment, the new law lets you diversify out of it after a few years--a good idea, since you never want too much tied up in one stock, especially your employer's. Another good change: If you die, any beneficiary you name can now roll your 401(k) into an IRA tax-free, a privilege that used to apply only to spouses.

THE BIGGEST CONTROVERSY Your 401(k) provider can now offer you investment help. (Before, only firms not affiliated with the plan could give advice.) Special rules are intended to make sure the provider doesn't just steer you into its own mutual funds, but some critics doubt they'll work.

PENSION PROTECTION? Jack VanDerhei, a fellow at the Employee Benefit Research Institute, thinks stiff new rules in the law may drive employers to eliminate the traditional pension or to replace it with a cheaper version called a cash-balance plan. The problem: These usually mean lower benefits for older workers. All the more reason to save all you can in your 401(k).

Quick Take on the New Rules

WHAT'S TO LIKE

• Preserves today's high savings limits in 401(k)s and IRAs

• Makes tax-free withdrawals from 529 plans permanent

• Simplifies estate planning and helps you keep from overloading on company stock

• Clears the way for employers to offer Roth 401(k)s

WHAT'S CONTROVERSIAL

• Providers can give you investment advice, a boon for novices--or a potential conflict of interest.

• Tough rules may push employers to close traditional pensions.

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