To amend the Internal Revenue Code of 1986 to permit deferred compensation plans of State and local governments and tax-exempt organizations to make certain distributions, and for other purposes.

Amends the Internal Revenue Code to permit deferred compensation plans of State and local governments and tax-exempt organizations to make distributions to a participant if: (1) the total does not exceed $3,500; and (2) such amount may be distributed only if no amount has been deferred during the two-year period ending on the date of distribution and there has been no prior distribution. Allows the plan to distribute such amount without the participant's consent under such circumstances.

Allows participants to make one change in their deferred distribution date.

Provides for a cost-of-living adjustment to the maximum deferral amount per year.