Pension Improvement Act of 1998

Pension Improvement Act of 1998 - Amends the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA) to set separate minimum vesting standards for defined contribution and defined benefit plans.

(Sec. 3) Amends the Internal Revenue Code to require that plans entitle an employee to elect a rollover distribution to an individual retirement plan within 90 days of separation. Imposes a 25 percent tax on early distributions within 2 years after such a rollover. Exempts such rollovers from withholding.

(Sec. 4) Allows penalty-free distributions from individual retirement plans of certain unemployed individuals.

(Sec. 5) Amends the Internal Revenue Code and ERISA to require, if the present value of any nonforfeitable accrued benefit is under a specified dollar amount, that a plan allow a benefit to be immediately distributed only in a trustee-to-trustee transfer to an individual retirement plan. Requires, if the present value of a joint and survivor annuity or preretirement survivor annuity is under a specified dollar amount, that the plan immediately distribute the value only if the participant and the participant's spouse designate one or more individual retirement plans and the distribution is made in a trustee-to-trustee transfer.

Amends the Internal Revenue Code to require that, in order to be treated as not made available as a result of an election or an involuntary distribution, amounts distributed from a State or local government plan or nonprofit organization plan be distributed in a trustee-to-trustee transfer to an individual retirement account. Imposes a 25 percent tax on early distributions within 2 years after such a distribution. Exempts such distributions from withholding.