Pension Portability Act of 1987

Pension Portability Act of 1987 - Title I: Rules Generally Applicable to Simplified Employee Pensions - Amends the Employee Retirement Income Security Act of 1974 (ERISA) to define a "simplified employee pension plan" as a pension plan consisting of one or more individual retirement accounts or annuities that meet certain requirements of the Internal Revenue Code.

Directs the Secretary of Labor to prescribe an alternative method of compliance with requirements for simplified employee pension plans. Establishes participation and vesting requirements for such plans.

Requires each simplified employee pension plan and portable pension plan to provide that: (1) the distribution of the accrued benefit with respect to each participant will be only in a permitted retirement income form; (2) no distribution may be made without the consent of the participant or beneficiary; and (3) the benefit will be distributed in accordance with a timely application in accordance with the terms of the plan.

Describes a standard retirement income form for simplified employee pension plans as: (1) a qualified joint and survivor annuity; (2) any other joint life annuity, including a cash refund annuity; (3) a single life annuity, including a refund annuity; or (4) any series of substantially equal periodic payments described under the Internal Revenue Code.

Allows participants to elect a form of distribution other than distribution over life expectancy, if such spousal consent requirements are met.

Requires the administrator of a simplified employee pension plan, prior to making a distribution, to provide to the individual who is to receive the distribution a written explanation of: (1) the provisions under which the distribution may be subject to tax or penalty under the Internal Revenue Code; and (2) the terms and conditions of the applicable permitted retirement income form, the participant's rights with respect to electing other forms of distribution, and spousal rights.

Declares that for simplified employee pension plans a beneficiary means a spouse of the participant or any other person designated by the participant or by the terms of the plan. Specifies conditions under which spousal consent requirements are to be met.

Amends the Internal Revenue Code to make conforming amendments.

Exempts simplified employee pension plans from specified funding provisions of ERISA.

Authorizes employees to elect alternative salary reduction arrangements under such plans where the employer may make elective contributions to the pension on behalf of the employee or directly to the employee in cash for any year. Specifies the maximum salary reduction amount.

Establishes rules governing employer contributions, including participation requirements, the method of determining employer contributions and compensation amounts, and tax reporting requirements.

Allows employees to establish simplified employee pension plans with respect to separate lines of business.

Title II: Portable Pensions - Amends the Internal Revenue Code and ERISA to define a portable pension plan as an arrangement of one or more individual retirement accounts or annuities which: (1) meets the requirements of a simplified employee pension; and (2) provides for the transfer of plan investment accumulations to other tax-qualified plans.

Makes provisions relating to favorable tax treatment inapplicable to cash distributions from rollovers from portable pension plans.

Preserves the five-year income averaging treatment for lump sum distributions from portable pension plans which are separately accounted for under such plans.

Provides that amounts exceeding the maximum rollover allowable shall not be taxable if such amounts are transferred to a portable pension plan in a direct trustee-to-trustee transfer.

Establishes special rules for portable pension plans under ERISA. Relieves the administrators of such plans of liability for reliance in good faith on information provided by an employer, participant, or beneficiary which constitutes a misrepresentation or mistake of fact. Sets forth the responsibilities of the plan sponsor, administrator, and employer.

Requires a portable pension plan to: (1) meet employee self-directed account regulations; (2) designate a fiduciary; and (3) provide at least one investment option in U.S. securities.

Directs the Secretary and the Secretary of the Treasury to prescribe by regulation one or more prototype portable pension plans.

Amends ERISA and the Internal Revenue Code to provide for the direct transfer to a portable pension plan from any other pension plan of the entire nonforfeitable benefit of a participant under such other pension plan.