Retiree Health Benefits and Pension Preservation Act of 1988

Retiree Health Benefits and Pension Preservation Act of 1988 - Title I: Expansion of Post-Retirement Health Care and Long-Term Care Benefits Which May be Provided by Pension Plans - Amends the Internal Revenue Code to allow pension plans to provide long-term care benefits for retired employees and their families. Includes among such benefits the costs of medically necessary non-emergency diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services. Requires that a medical expense benefits account and a long-term care expense benefits account be established for each employee.

Permits the treatment of any pension plan as a profit-sharing plan if the employer contributes to accounts funding retiree medical and long-term care benefits.

Increases from ten percent to 100 percent the tax on any employer reversion of qualified pension plan assets. Exempts reversion amounts transferred to accounts funding retiree medical and long-term care benefits. Prohibits transfers that would reduce plan assets below 125 percent of the plan's current liability. Treats amounts that remain in the expense account after seven years as employer reversions.

Amends the Omnibus Budget Reconciliation Act of 1987 to repeal provisions defining the full-funding limitation for qualified pension plans as 150 percent of current liability.

Title II: Certain Employers Required to Offer Simplified Employee Pensions Funded by Salary Reduction Arrangements - Requires any employer of five or more employees performing more than 1,000 hours of service during the calendar year to establish a qualified salary reduction simplified employee pension (SEP) for each employee who: (1) requests that one be established; (2) is at least 21 years old; and (3) has served the employer for at least one year. Excepts employers who maintain a qualified employee annuity plan or qualified pension, profit-sharing, or stock bonus plan, as well as State and local governments and tax-exempt employers. Prescribes conditions to be met by qualified SEPs. Exempts contributions from employment and unemployment taxes.

Imposes limitations on early distributions from qualified retirement plans. Lists exceptions, including cases of early retirement after attaining age 55.

Replaces the currently imposed ten percent additional tax on early distributions from qualified retirement plans with a 20 percent additional tax on distributions violating the applicable limitations.

Directs the Secretary of the Treasury to study and report to the Congress within six months of this Act's enactment on the current rules governing transfers of assets between pension plans and between plans and individual retirement accounts when an employee separates from service.