(c) 403(b) PLANS.—
(1) Clause (ii) of section 403(b)(7)(A) of such 
Code is amended to read as follows: 
‘‘(ii) under the custodial account, no 
such amounts may be paid or made avail-
able to any distributee before the occur-
rence of a distributable event.’’. 
(2) Paragraph (11) of section 403(b) of such 
Code is amended by striking ‘‘may be paid only’’ 
and all that follows and inserting ‘‘may be paid only 
upon the occurrence of a distributable event.’’. 
(d) ELIGIBLE DEFERRED COMPENSATION PLANS.—
(1) Subparagraph (A) of section 457(d)(1) of 
such Code is amended to read as follows: 
‘‘(A) under the plan amounts will not be 
made available to participants or beneficiaries 
earlier than the occurrence of a distributable 
event,’’. 
(2) Paragraph (1) of section 457(a) of such 
Code is amended to read as follows: 
‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensa-
tion plan, and any income attributable to the 
amounts so deferred, shall be includible in gross in-
come only for the taxable year in which such com-
pensation or other income is paid to the participant 
or other beneficiary.’’. 
(3) Subsection (d) of section 457 of such Code 
is amended by striking paragraph (3). 
(4) Paragraph (9) of section 457(e) of such 
Code is amended to read as follows: 
‘‘(9) SMALL BENEFITS NOT TREATED AS MADE 
AVAILABLE BY REASON OF CERTAIN ELECTIONS.—
For purposes of subsection (d)(1)(A), the total 
amount payable to a participant under an eligible 
deferred compensation plan shall not be treated as 
made available merely because the participant may 
elect to receive such amount (or the plan may dis-
tribute such amount without the participant’s con-
sent) if—
‘‘(A) the portion of such amount which is 
not attributable to rollover contributions (as de-
fined in section 411(a)(11)(D)) does not exceed 
the dollar limit under section 411(a)(11)(A), 
and 
‘‘(B) such amount may be distributed only 
if—
‘‘(i) no amount has been deferred 
under the plan with respect to such partici-
pant during the 2-year period ending on 
the date of the distribution, and 
‘‘(ii) there has been no prior distribu-
tion under the plan to such participant to 
which this subparagraph applied.’’. 
(e) HARDSHIP DEFINITION.—
(1) IN GENERAL.—Within 180 days after the 
date of enactment of this Act, the Secretary of the 
Treasury shall issue rules under which, except as 
provided in paragraph (2), the determination of 
whether a participant has had a hardship for pur-
poses of section 414(w)(1)(E) of the Internal Rev-
enue Code of 1986 shall be made pursuant to Treas-
ury Regulation section 1.401(k)–1(d)(3), as such 
section is amended from time to time by the Sec-
retary. 
(2) BENEFICIARIES.—Within 180 days after 
the date of enactment of this Act, the Secretary of 
the Treasury shall modify the rules for determining 
whether a participant has had a hardship for pur-
poses of section 414(w)(1)(E) of such Code. Pursu-
ant to such modification, any event, such as a med-
ical expense, that would constitute a hardship if it 
occurred with respect to a participant’s spouse or 
dependent (as defined in section 152 of such Code)
shall, to the extent permitted under a plan, con-
stitute a hardship if it occurs with respect to a per-
son who is a beneficiary with respect to the partici-
pant under the plan. 
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to years beginning after December 31, 
2005. 
(2) SPECIAL RULE.—In the case of amounts at-
tributable to contributions to an eligible deferred 
compensation plan (as defined in section 457(b) of 
the Internal Revenue Code of 1986) made before the 
first day of the first year beginning after December 
31, 2005, withdrawals of such amounts from such a 
plan may be permitted upon unforeseeable emer-
gency (as defined under section 457(d)(1)(A)(iii) of 
such Code, as in effect on the day before the enact-
ment of this Act). 
SEC. 306. ALLOW LEVEL DOLLAR CONTRIBUTIONS TO SEPS. 
(a) IN GENERAL.—Subparagraph (C) of section 
408(k)(3) of the Internal Revenue Code of 1986 (relating 
to contributions must bear uniform relationship to total 
compensation) is amended by inserting before the period 
at the end the following: ‘‘or unless such contributions are
a uniform dollar amount on behalf of each such em-
ployee.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to years beginning after December 
31, 2005. 
SEC. 307. TAX TREATMENT OF CERTAIN NONTRADE OR 
BUSINESS SEP CONTRIBUTIONS. 
(a) IN GENERAL.—Subparagraph (B) of section 
4972(c)(6) of the Internal Revenue Code of 1986 (relating 
to exceptions) is amended—
(1) by striking ‘‘408(p) or’’ and inserting 
‘‘408(p),’’, and 
(2) by inserting after ‘‘401(k)(11))’’ the fol-
lowing: ‘‘, or a simplified employee pension (within 
the meaning of section 408(k))’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2005. 
SEC. 308. UNIFORM AVAILABILITY OF DESIGNATED RSA 
CONTRIBUTIONS. 
(a) IN GENERAL.—Paragraph (1) of section 402A(e) 
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘and’’ at the end of subparagraph (A), by striking 
the period at the end of subparagraph (B) and inserting
‘‘, and’’, and by adding at the end the following subpara-
graphs: 
‘‘(C) an eligible deferred compensation 
plan under section 457 of an eligible employer 
described in section 457(e)(1)(A), and 
‘‘(D) an annuity plan described in section 
403(a).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 309. ALLOW CERTAIN PLAN TRANSFERS AND MERG-
ERS. 
(a) AMENDMENT TO THE INTERNAL REVENUE CODE 
OF 1986.—
(1) IN GENERAL.—Section 414 of the Internal 
Revenue Code of 1986 (relating to definitions and 
special rules) is amended by adding at the end the 
following new subsection: 
‘‘(x) CERTAIN PLAN TRANSFERS AND MERGERS.—
‘‘(1) IN GENERAL.—Under rules prescribed by 
the Secretary, no amount shall be includible in gross 
income by reason of—
‘‘(A) a transfer of all or a portion of the 
account balance of a participant or beneficiary, 
whether or not vested, from a defined contribu-
tion plan described in section 401(a) or section 
403(a) of an employer to an annuity contract 
described in section 403(b) of the same em-
ployer, 
‘‘(B) a transfer of all or a portion of the 
account balance of a participant or beneficiary, 
whether or not vested, from an annuity contract 
described in section 403(b) of an employer to a 
defined contribution plan described in section 
401(a) or section 403(a) of the same employer, 
or 
‘‘(C) a merger of a defined contribution 
plan described in section 401(a) or section 
403(a) of an employer with an annuity contract 
described in section 403(b) of the same em-
ployer, 
so long as the transfer or merger does not cause a 
reduction in the vested benefit or total benefit (in-
cluding non-vested benefit) of any participant or 
beneficiary. A plan or contract shall not fail to be 
considered to be described in sections 401(a), 
403(a), or 403(b) (as applicable) merely because 
such plan or contract engages in a transfer or merg-
er described in this paragraph.
‘‘(2) DISTRIBUTIONS.—Amounts transferred or 
merged pursuant to paragraph (1) shall be subject 
to the requirements of paragraphs (3) and (4) and 
to the distribution requirements under sections 
401(a), 403(a), or 403(b) applicable to the trans-
feree or merged plan. 
‘‘(3) SPOUSAL
CONSENT
AND
ANTI-CUTBACK 
PROTECTION.—In the case of a transfer or merger 
described in paragraph (1), amounts in the trans-
feree or merged plan that are attributable to the 
transferor or predecessor plan shall—
‘‘(A)(i) be subject to section 401(a)(11) or 
section 205 of the Employee Retirement Income 
Security Act of 1974 to the extent that such 
sections applied to such amounts in the trans-
feror or predecessor plan, or 
‘‘(ii) be required to satisfy the require-
ments of section 401(a)(11)(B)(iii)(I) or section 
205(b)(1)(C)(i) of the Employee Retirement In-
come Security Act of 1974 to the extent that 
such sections applied to such amounts in the 
transferor or predecessor plan, and 
‘‘(B) be treated as subject to section 
411(d)(6) and section 204(g) of the Employee 
Retirement Income Security Act of 1974 to the
extent that such amounts were subject to such 
sections in the transferor or predecessor plan. 
‘‘(4) SPECIAL RULES.—Under rules prescribed 
by the Secretary, to the extent amounts transferred 
or merged pursuant to paragraph (1) were otherwise 
entitled to grandfather treatment under the trans-
feror or predecessor plan, such amounts (and income 
or loss attributable thereto) shall remain entitled to 
such treatment under the transferee or merged plan. 
The rules prescribed by the Secretary shall require 
that such amounts be separately accounted for by 
the transferee or merged plan. For purposes of this 
paragraph, ‘grandfather treatment’ shall mean spe-
cial treatment under the Internal Revenue Code of 
1986 that is provided for prior benefits, prior peri-
ods of time, or certain individuals in connection with 
a change in the applicable law. 
‘‘(5) CONSENT.—In the case of a qualified trust 
described in section 401(a) or 403(a) and an annu-
ity contract described in section 403(b) with respect 
to which transfers may be made only with the con-
sent of a participant or beneficiary pursuant to the 
terms of such trust or contract or pursuant to appli-
cable law, such consent requirement shall apply 
without regard to this subsection. Nothing in this
subsection shall affect the application of contract or 
plan terms otherwise applicable in the case of a 
withdrawal from the contract or plan.’’. 
(2) AGGREGATION.—Paragraph (2) of section 
414(t) of such Code is amended by inserting 
‘‘414(x),’’ after ‘‘274(j),’’. 
(b) AMENDMENT TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 4 of the Em-
ployee Retirement Income Security Act of 1974 (29 
U.S.C. 1003) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(d) This title shall apply to any plan or contract de-
scribed in section 414(x) of the Internal Revenue Code 
of 1986 to the extent necessary to comply with the re-
quirements of such section.’’. 
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by 
this section shall apply to transfers or mergers in 
years beginning after the Secretary of the Treasury 
prescribes rules under section 414(x) of the Internal 
Revenue Code of 1986. 
(2) RULES.—The Secretary of the Treasury 
shall issue rules under section 414(x) of the Internal 
Code of 1986 within 1 year after the date of enact-
ment of this Act.
TITLE IV—EXPANDING RETIRE-
MENT SAVINGS FOR TAX-EX-
EMPT 
ORGANIZATION 
AND 
GOVERNMENT EMPLOYEES 
SEC. 401. WAIVER OF 10 PERCENT EARLY WITHDRAWAL 
PENALTY TAX ON CERTAIN DISTRIBUTIONS 
OF PENSION PLANS FOR PUBLIC SAFETY EM-
PLOYEES. 
(a) IN GENERAL.—Subsection (t) of section 72 of the 
Internal Revenue Code of 1986 (relating to subsection not 
to apply to certain distributions) is amended by adding 
at the end the following new paragraph: 
‘‘(10) DISTRIBUTIONS
TO
QUALIFIED
PUBLIC 
SAFETY EMPLOYEES IN GOVERNMENTAL PLANS.—
‘‘(A) IN GENERAL.—In the case of a dis-
tribution to a qualified public safety employee 
from a governmental plan (within the meaning 
of section 414(d)) which is a defined benefit 
plan, paragraph (2)(A)(v) shall be applied by 
substituting ‘age 50’ for ‘age 55’. 
‘‘(B) QUALIFIED
PUBLIC
SAFETY
EM-
PLOYEE.—For purposes of this paragraph, the 
term ‘qualified public safety employee’ means 
any employee of a State or political subdivision 
of a State who provides police protection, fire-
fighting services, or emergency medical services 
for any area within the jurisdiction of such 
State or political subdivision.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distributions after the date of 
the enactment of this Act. 
SEC. 402. CLARIFICATIONS REGARDING PURCHASE OF PER-
MISSIVE SERVICE CREDIT. 
(a) IN GENERAL.—Subparagraph (A) of section 
457(e)(17) of the Internal Revenue Code of 1986 (relating 
to trustee-to-trustee transfers to purchase permissive serv-
ice credit), and subparagraph (A) of section 403(b)(13) 
of such Code (relating to trustee-to-trustee transfers to 
purchase permissive service credit), are both amended by 
striking ‘‘section 415(n)(3)(A)’’ and inserting ‘‘section 
415(n)(3) (without regard to subparagraphs (B) and (C) 
thereof)’’. 
(b) 
DISTRIBUTION
REQUIREMENTS.—Section 
457(e)(17) and section 403(b)(13) of such Code are both 
amended by adding at the end the following sentence: 
‘‘Amounts transferred under this paragraph shall be dis-
tributed solely in accordance with section 401(a) as appli-
cable to such defined benefit plan.’’. 
(c) SERVICE
CREDIT.—Clause 
(ii) 
of 
section 
415(n)(3)(A) of such Code is amended to read as follows:
‘‘(ii) which relates to benefits with re-
spect to which such participant is not oth-
erwise entitled, and’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect as if included in the amend-
ments made by section 647 of the Economic Growth and 
Tax Relief Reconciliation Act of 2001. 
SEC. 403. ELIGIBILITY FOR PARTICIPATION IN RETIRE-
MENT PLANS. 
An individual shall not be precluded from partici-
pating in an eligible deferred compensation plan by reason 
of having received a distribution under section 457(e)(9) 
of the Internal Revenue Code of 1986, as in effect prior 
to the enactment of the Small Business Job Protection 
Act of 1996. 
SEC. 404. CLARIFICATION OF MINIMUM DISTRIBUTION 
RULES. 
The Secretary of the Treasury shall issue regulations 
under which a governmental plan (as defined in section 
414(d) of the Internal Revenue Code of 1986) shall, for 
all years to which section 401(a)(9) of such Code applies 
to such plan, be treated as having complied with such sec-
tion 401(a)(9) if such plan complies with a reasonable 
good faith interpretation of such section 401(a)(9).
SEC. 405. CHURCH PLAN RULE. 
(a) IN GENERAL.—Paragraph (11) of section 415(b) 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following: ‘‘Subparagraph (B) of para-
graph (1) shall not apply to a plan maintained by an orga-
nization described in section 3121(w)(3) except with re-
spect to highly compensated benefits. For purposes of this 
paragraph, the term ‘highly compensated benefits’ means 
any benefits accrued for an employee in any year on or 
after the first year in which such employee is a highly com-
pensated employee (as defined in section 414(q)) of the 
organization described in section 3121(w)(3). For pur-
poses of applying paragraph (1)(B) to highly compensated 
benefits, all benefits of the employee otherwise taken into 
account (without regard to this paragraph) shall be taken 
into account.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2005. 
SEC. 406. CLARIFICATION OF TREATMENT OF INDIAN TRIB-
AL GOVERNMENTS. 
(a) DEFINITION OF GOVERNMENTAL PLAN.—
(1) AMENDMENT TO INTERNAL REVENUE CODE 
OF 1986.—Section 414(d) of the Internal Revenue 
Code of 1986 (definition of governmental plan) is 
amended by adding at the end thereof the following
new sentence: ‘‘The term ‘governmental plan’ also 
includes a plan established or maintained for its em-
ployees by an Indian tribal government (as defined 
in section 7701(a)(40)), a subdivision of an Indian 
tribal government (determined in accordance with 
section 7871(d)), an agency or instrumentality of an 
Indian tribal government or a subdivision thereof, or 
an entity established under tribal, Federal, or State 
law which is wholly owned or controlled by any of 
the foregoing.’’. 
(2) AMENDMENT TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 3(32) of 
the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(32)) is amended by adding at 
the end the following new sentence: ‘‘The term ‘gov-
ernmental plan’ also includes a plan established or 
maintained for its employees by an Indian tribal 
government (as defined in section 7701(a)(40) of the 
Internal Revenue Code of 1986), a subdivision of an 
Indian tribal government (determined in accordance 
with section 7871(d) of such Code), an agency or in-
strumentality of an Indian tribal government or sub-
division thereof, or an entity established under trib-
al, Federal, or State law which is wholly owned or 
controlled by any of the foregoing.’’.
100
(b) CLARIFICATION
OF TREATMENT
OF INDIAN 
TRIBAL GOVERNMENTS.—
(1) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.—
(A) POLICE
AND
FIREFIGHTERS.—Sub-
paragraph (H) of section 415(b)(2) of the In-
ternal Revenue Code of 1986 (defining partici-
pant) is amended—
(i) in clause (i) by striking ‘‘State or 
political subdivision’’ and inserting ‘‘State, 
Indian tribal government (as defined in 
section 7701(a)(40)), or any political sub-
division’’, and 
(ii) in clause (ii)(I) by striking ‘‘State 
or political subdivision’’ both places it ap-
pears and inserting ‘‘State, Indian tribal 
government (as so defined), or any political 
subdivision’’. 
(B) STATE
AND
LOCAL
GOVERNMENT 
PLANS.—
(i) IN GENERAL.—Subparagraph (A) 
of section 415(b)(10) of such Code (relat-
ing to limitation to equal accrued benefit) 
is amended—
101
(I) by inserting ‘‘, Indian tribal 
government (as defined in section 
7701(a)(40)),’’ after ‘‘State’’, 
(II) by inserting ‘‘any’’ before 
‘‘political subdivision’’, and 
(III) by inserting ‘‘any of’’ before 
‘‘the foregoing’’. 
(ii) CONFORMING AMENDMENT.—The 
heading for paragraph (10) of section 
415(b) of such Code is amended to read as 
follows: 
‘‘(10) SPECIAL RULE FOR STATE, INDIAN TRIB-
AL, AND LOCAL GOVERNMENT PLANS.—’’. 
(C) GOVERNMENT
PICK
UP
CONTRIBU-
TIONS.—Paragraph (2) of section 414(h) of 
such Code (relating to designation by units of 
government) is amended by striking ‘‘State or 
political subdivision’’ and inserting ‘‘State, In-
dian tribal government (as defined in section 
7701(a)(40)), or any political subdivision’’. 
(D) DISTRIBUTIONS
TO
PUBLIC
SAFETY 
EMPLOYEES.—Subparagraph (B) of section 
72(t)(10) of such Code, as added by this Act, 
is amended—