110 STAT. 1812 PUBLIC LAW 104-188—AUG. 20, 1996 SEC. 1447. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS. (a) SPECIAL RULES FOR PLAN DISTRIBUTIONS. —Paragraph (9) of section 457(e) (relating to other definitions and special rules) is amended to read as follows: " (9) BENEFITS NOT TREATED AS MADE AVAILABLE BY REASON OF CERTAIN ELECTIONS, ETC. — "(A) TOTAL AMOUNT PAYABLE IS $3,500 OR LESS.—The total amount payable to a participant under the plan shall not be treated as made available merely because the participant may elect to receive such amount (or the plan may distribute such amount without the participant's consent) if— "(i) such amount does not exceed $3,500, and "(ii) such amount may be distributed only if— "(I) no amount has been deferred under the plan with respect to such participant during the 2-year period ending on the date of the distribution, and "(II) there has been no prior distribution under the plan to such participant to which this subparagraph applied. A plan shall not be treated as failing to meet the distribution requirements of subsection (d) by reason of a distribution to which this subparagraph applies. " (B) ELECTION TO DEFER COMMENCEMENT OF DISTRIBU- TIONS.— The total amount payable to a participant under the plan shall not be treated as made available merely because the participant may elect to defer commencement of distributions under the plan if— "(i) such election is made after amounts may be available under the plan in accordance with subsection (d)(1)(A) and before commencement of such distributions, and "(ii) the participant may make only 1 such election.". (b) COST-OF-LIVING ADJUSTMENT OF MAXIMUM DEFERRAL AMOUNT. —Subsection (e) of section 457, as amended by section 1444(b)(2) (relating to governmental plans), is amended by adding at the end the following new paragraph: "(15) COST-OF-LIVING ADJUSTMENT OF MAXIMUM DEFERRAL AMOUNT.—The Secretary shall adjust the $7,500 amount specified in subsections (b)(2) and (c)(1) 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, 1994, and any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500.". 26 USC 457 note. (c) EFFECTIVE DATE.— The amendments made by this section shall apply to taxable years beginning after December 31, 1996. SEC. 1448. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS. (a) IN GENERAL. —Section 457 is amended by adding at the end the following new subsection:
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