The Act increases contribution limits on education IRAs from $500 to $2,000 and withdrawals can be used for elementary as well as secondary school expenses. Individuals now have until April 15 of the year following the taxable year (instead of December 31 of the taxable year under the old law) to make contributions for the taxable year. Contributions are not deductible, but earnings accumulate on a tax-free basis.

The maximum annual individual retirement account (IRA) contribution, which has been set at $2,000 for the last 20 years, is raised as follows:
for 2002-2004 — $3,000;
for 2005-2007 — $4,000;
and for 2008 — $5,000.
Thereafter, the limit is indexed for inflation annually (in $500 increments). Individuals age 50 and over are permitted to make additional annual IRA contributions of $500 for 2002-2005 and $1,000 for 2006 and thereafter.

The Act enhances the value of 401(k) plans by increasing the general contribution limit and allowing individuals over age 50 to make additional contributions. The Act also allows individuals to contribute amounts that are not excluded from income to a 401(k) plan in a manner similar to Roth IRA contributions.
The limits on pre-tax 401(k) contributions are increased from $10,500 in 2001 to $15,000 by 2006. The phased-in increase of the new limit, which is indexed for inflation in $500 increments beginning in 2006, is as follows: for 2002 — $11,000; for 2003 — $12,000; for 2004 — $13,000; for 2005 — $14,000; and for 2006 — $15,000.
The act also allows individuals age 50 and over to make additional annual contributions to salary reduction plans (i.e., 401(k) plans). These individuals can make "catch-up" contributions of $1,000 in 2002; $2,000 in 2003; $3,000 in 2004; $4,000 in 2005; and $5,000 in 2006 and thereafter. Catch-up contribution limits are indexed for inflation in $500 increments beginning in 2007.

Effective in 2006, the Act allows employers to create a new type of elective deferral program, referred to as a "Qualified Roth Contribution Program", under which participants contributing to a 401(k) plan or a 403(b) annuity program may designate a portion of their contributions as Roth contributions. Participants can make Roth contributions in much the same manner as elective deferrals, but the participant specifically designates them as such. However, unlike "regular" deferrals, Roth deferrals are not income tax excludable.
Roth contributions are treated as elective deferrals for all tax purposes other than for income taxes. As an elective deferral, a Roth contribution can be included as part of the catch-up contribution included in the Act for individuals over age 50.

The Act includes a number of provisions to enhance portability of retirement account savings for workers who change jobs, effective for distributions made after 2002.
The most significant of these is the expansion of available rollovers. The Act generally allows any pretax IRA funds to be rolled into any other type of retirement plan. Prior to the Act, IRAs could be rolled over into non-IRA vehicles only if the IRA consisted solely of amounts attributable to a prior plan distribution. This rule required individuals to maintain an IRA for rollovers of prior qualified plan distributions that was separate from all other IRAs.
Although the rules for rollover contributions are substantially liberalized, rollovers are not possible if the individual cannot receive a distribution from the plan or if the recipient plan does not authorize the rollover contribution.
The Act also allows surviving spouses to roll over distributions into any such plan, gives the IRS authority to waive the so-called "60-day" rollover rule upon a showing of hardship, and provides for automatic rollover of any automatic cashout distribution of at least $1,000 into an IRA.