(i) IN GENERAL.—Subparagraph (A) 
of section 415(b)(10) of such Code (relat-
ing to limitation to equal accrued benefit) 
is amended— 
(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— 
(i) by striking ‘‘State or political sub-
division of a State’’ and inserting ‘‘State, 
Indian tribal government (as defined in 
section 7701(a)(4)), or political subdivision 
thereof’’, and 
(ii) by striking ‘‘such State or political 
subdivision’’ and inserting ‘‘such State, In-
dian tribal government (as defined in sec-
tion 7701(a)(4)), or political subdivision 
thereof’’. 
(2) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 4021(b) of 
the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1321(b)) is amended— 
(A) in paragraph (12), by striking ‘‘or’’ at 
the end; 
(B) in paragraph (13), by striking ‘‘plan.’’ 
and inserting ‘‘plan; or’’; and 
(C) by adding at the end the following new 
paragraph:
‘‘(14) established and maintained for its em-
ployees 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 govern-
ment (determined in accordance with section 
7871(d) of such Code), an agency or instrumentality 
of an Indian tribal government or subdivision there-
of, or an entity established under tribal, Federal, or 
State law which is wholly owned or controlled by any 
of the foregoing.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning before, on, or 
after the date of the enactment of this Act. 
SEC. 407. DEFERRAL AGREEMENTS. 
(a) IN GENERAL.—Paragraph (4) of section 457(b) 
of the Internal Revenue Code of 1986 is amended by add-
ing the following after ‘‘month’’: ‘‘or, in the case of a plan 
of an eligible employer described in subsection (e)(1)(A), 
before the date on which the compensation is currently 
available’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to years beginning after December 
31, 2005.
SEC. 408. PLANS MAINTAINED BY STATE OR LOCAL GOV-
ERNMENTS. 
(a) IN GENERAL.—Subparagraph (F) of section 
415(b)(2) of the Internal Revenue Code of 1986 is amend-
ed to read as follows: 
‘‘(F) PLANS
MAINTAINED
BY
STATE
OR 
LOCAL GOVERNMENTS.— 
‘‘(i) IN GENERAL.—In the case of a 
governmental plan (within the meaning of 
section 414(d)) maintained by a State of 
local government or political subdivision 
thereof (or agency or instrumentality 
thereof), subparagraph (C) shall be applied 
as if the following sentence were added at 
the end: ‘The reduction under this sub-
paragraph shall not reduce the limitation 
of paragraph (l)(A) below (i) $130,000 if 
the benefit begins at or after age 55, or 
(ii) if the benefit begins before age 55, the 
equivalent of the $130,000 limitation at 
age 55.’’’. 
(b) COST-OF-LIVING ADJUSTMENTS.— 
(1) PLANS MAINTAINED BY STATE OR LOCAL 
GOVERNMENTS.—Paragraph (1) of section 415(d) of 
such Code is amended by striking ‘‘and’’ at the end 
of subparagraph (B), by redesignating subparagraph
(C) as subparagraph (D), and by inserting after sub-
paragraph (B) the following new subparagraph: 
‘‘(C) the $130,000 amount in subsection 
(b)(2)(F), and’’. 
(2) BASE PERIOD.—Paragraph (3) of section 
415(d) of such Code is amended by redesignating 
subparagraph (D) as subparagraph (E) and by in-
serting after subparagraph (C) the following new 
subparagraph: 
‘‘(D) $130,000 AMOUNT.—The base period 
taken into account for purposes of paragraph 
(l)(C) is the calendar quarter beginning July 1, 
2005.’’. 
(3) ROUNDING RULE RELATING TO DEFINED 
BENEFIT
PLANS.—Subparagraph (B) of section 
415(d)(4) of such Code is amended to read as fol-
lows: 
‘‘(B) $130,000 AND
$40,000
AMOUNTS.— 
Any increase under subparagraph (C) or (D) of 
paragraph (1) which is not a multiple of $1,000 
shall be rounded to the next lowest multiple of 
$1,000.’’. 
(4) CONFORMING AMENDMENT.—Subparagraph 
(E) of section 415(d)(3) of such Code (as amended
by paragraph (2)) is amended by striking ‘‘para-
graph (l)(C)’’ and inserting ‘‘paragraph (l)(D)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2005. 
SEC. 409. CLARIFICATION OF TREATMENT OF SECTION 
403(b) PROGRAMS. 
(a) ADMINISTRATION.—The Secretary of the Treas-
ury shall not issue any rules which would impose materi-
ally greater burdens and responsibilities on employers with 
respect to the administration of a program described in 
section 403(b) of the Internal Revenue Code of 1986 than 
are imposed as of the date of enactment of this Act. 
(b) TRANSFERS.—Under rules prescribed by the Sec-
retary of the Treasury, participants shall be permitted to 
directly transfer all or part of their interest in a section 
403(b) annuity contract or custodial account to another 
section 403(b) annuity contract or custodial account with-
out violating the prohibitions against in-service with-
drawals in sections 403(b)(7) and 403(b)(11) of such 
Code. These rules shall be consistent with the principles 
of Revenue Ruling 90–24. 
(c) PROPOSED REGULATIONS.—The Secretary of the 
Treasury shall not finalize proposed regulations published
100 
on November 15, 2004, unless such regulations reflect the 
requirements of this section. 
(d) EFFECTIVE DATE.—The provisions of this sec-
tion shall take effect on the date of enactment of this Act. 
TITLE V—SIMPLIFICATION AND 
EQUITY 
SEC. 501. UPDATING AND SIMPLIFYING THE MINIMUM DIS-
TRIBUTION RULES. 
(a) REQUIRED DISTRIBUTIONS.— 
(1) INCREASE IN AGE FOR REQUIRED BEGIN-
NING
DATE.—Clauses (i) and (ii) of section 
401(a)(9)(C) of the Internal Revenue Code of 1986 
(relating to required beginning date) are amended by 
striking ‘‘age 701⁄2’’ each place it appears and in-
serting ‘‘the applicable age’’. 
(2) MANDATORY
DISTRIBUTION
AGE.—Para-
graph (9) of section 401(a) of such Code (relating 
to required distributions) is amended by inserting at 
the end the following new subparagraph: 
‘‘(H) APPLICABLE AGE.— 
‘‘(i) IN
GENERAL.—For purposes of 
this paragraph, the applicable age shall be 
701⁄2, adjusted pursuant to clause (ii). 
‘‘(ii) ADJUSTMENT.—The Secretary 
shall increase the applicable age annually
101 
in a manner proportional to increases in 
life expectancy (as determined by the Sec-
retary) that occur on or after January 1, 
2005, except that no adjustment shall be 
made until the applicable age as adjusted 
would equal or exceed age 72. Any applica-
ble age which is not a whole number shall 
be rounded to the next lower whole num-
ber.’’. 
(3) SPOUSE BENEFICIARIES.—Subclause (I) of 
section 401(a)(9)(B)(iv) of such Code (relating to 
special rule for surviving spouse of employee) is 
amended by striking ‘‘age 701⁄2’’ and inserting ‘‘the 
applicable age’’. 
(4) ACTUARIAL
ADJUSTMENT
OF
BENEFIT 
UNDER
DEFINED
BENEFIT
PLAN.—Clause (iii) of 
section 401(a)(9)(C) of such Code (relating to actu-
arial adjustment) is amended to read as follows: 
‘‘(iii) ACTUARIAL ADJUSTMENT.— 
‘‘(I) IN GENERAL.—In the case 
of a defined benefit plan, an employ-
ee’s accrued benefit shall be actuari-
ally increased to take into account the 
period after the applicable date during
102 
which the employee was not receiving 
any benefits under the plan. 
‘‘(II) APPLICABLE
DATE.—For 
purposes of clause (I), the term ‘appli-
cable date’ means April 1 of the cal-
endar year following the calendar year 
in which the employee attains age 
701⁄2.’’. 
(b) REDUCTION IN EXCISE TAX.—Subsection (a) of 
section 4974 of such Code (relating to excise tax on cer-
tain accumulations in qualified retirement plans) is 
amended by striking ‘‘50 percent’’ and inserting ‘‘25 per-
cent’’. 
(c) SIMPLIFICATION FOR INDIVIDUALS.— 
(1) IN GENERAL.—Section 408(a) of such Code 
is amended by redesignating subsection (r) as sub-
section (s) and by inserting after subsection (q) the 
following subsection— 
‘‘(r) MINIMUM
DISTRIBUTION
EXEMPTION
FOR 
SMALL ACCOUNTS.— 
‘‘(1) IN
GENERAL.—Subsections (a)(6) and 
(b)(3) shall not apply to the individual retirement 
accounts and individual retirement annuities of an 
individual described in paragraph (2). 
‘‘(2) INDIVIDUALS AFFECTED.—
103 
‘‘(A) IN GENERAL.—An individual is de-
scribed in this paragraph for a taxable year if, 
as of the last day of the preceding taxable year, 
the individual’s vested interest in all affected 
retirement plans has a combined value that 
does not exceed $100,000. 
‘‘(B) LIFE ANNUITY RULE.—For purposes 
of subparagraph (A), an individual’s vested in-
terest in an affected retirement plan shall not 
be taken into account to the extent that such 
interest has been used to purchase an annuity 
contract under which payments described in 
section 402(e)(7)(D)(i) are made. 
‘‘(3) AFFECTED RETIREMENT PLANS.— 
‘‘(A) IN GENERAL.—With respect to an in-
dividual, the term ‘affected retirement plan’ 
means any plan described in paragraph (3), (4), 
or (5) of section 4974(c), other than a Roth 
IRA. 
‘‘(B) SPECIAL RULE.—A plan described in 
section 4974(c)(3) shall not be treated as an af-
fected retirement plan with respect to an indi-
vidual for any year prior to the first year for 
which a distribution would be required under
104 
section 403(b)(10) (without regard to this sub-
section). 
‘‘(4) LIMITATION
ON
TOTAL
REQUIRED
DIS-
TRIBUTIONS.—Under rules prescribed by the Sec-
retary, in the case of an individual not described in 
paragraph (2), the total amount required to be dis-
tributed under subsections (a)(6) and (b)(3), in com-
bination with the total amount required to be dis-
tributed under section 403(b)(10), shall not exceed 
the excess of the combined value of the individual’s 
vested interest in all affected retirement plans over 
$100,000. 
‘‘(5) COST-OF-LIVING ADJUSTMENT.—The Sec-
retary shall adjust the $100,000 amount in para-
graphs (2) and (4) at the same time and in the 
same manner as under section 415(d), except that 
the base period shall be the calendar quarter ending 
September 30, 2005.’’. 
(2) PARALLEL
RULE
FOR
SECTION
403(b) 
PLANS.—Paragraph (10) of section 403(b) of such 
Code is amended by adding at the end the following: 
‘‘For purposes of applying the requirements of this 
paragraph, rules similar to the rules of section 
408(r) shall apply.’’. 
(3) CONFORMING AMENDMENTS.—