Why can I reopen a saved encrypted copy of my partially completed TaxForm without entering the Pass Word?

Just to clarify, did you save a copy of your return and you want to know why it is not password protected?

I can't directly answer the question, but my advice is to never rely on Turbotax's password system.  There are various historical reasons I don't need to go into.  If you want to protect your return, you can save it to an encrypted partition on your hard drive.  Mac can do this with Filevault and smart partitions, and I image similar technology exists in Windows.