Retirement Benefits Tax Act

Retirement Benefits Tax Act - Sets minimum standards relating to funding eligibility and vesting. Defines "minimum funding standard" as the excess of the sum of (1) the normal cost of the plan for such year plus interest on the unfunded liability, computed under the funding method used to determine normal costs, 5 percent of the unfunded liability for nonforfeitable benefits under the plan (computed as the excess of the present value of the then accrued nonforfeitable benefits over the fair market value of the assets), and the total of the amounts determined under clauses (1) and (2) with respect to the plan for each of the preceding plan years beginning after December 31, 1973, over "the total of the amounts determined under clauses (1) and (2) with respect to the plan for each of the preceding plan years beginning after December 31, 1973, over "the total of the amounts contributed to or under the plan for each of the preceding plan years beginning after December 31, 1973.

Outlines the criteria which must be met in order for a trust to qualify under this Act and defines the term "employee's accrued benefits".

States that a trust has vested when an employee's rights to his accrued benefit derived from his own contributions are nonforfeitable (other than by reason of death), and his rights in at least 50 percent of such accrued benefit derived from employer contributions are nonforfeitable (other than by reason of death) as of the close of the first plan year in which the sum of his age and the period of his active participation in the plan equals or exceeds 35 years, and his rights in the remaining percentage of all of his accrued benefit derived from employer contributions become nonforfeitable (other than by reason of death) not less rapidly than ratably over the next succeeding 5 plan years".

Defines those employees who are eligible as: (1) any employee who has not attained the age of 30 years and has a period of continuous service with the employer of 3 or more years; (2) any employee who has attained the age of 35 years but has not attained the age of 35 years and has a period of continuous service with the employer of 2 or more years; and (3) any employee who has attained the age of 35 years and who has a period of continuous service with the employer of 1 or more years.

Allows a deduction under the Internal Revenue Code savings where an individual paid cash amounts: (1) to or under a qualified individual retirement account which is exempt from tax, if the individual established such account, (2) to an employees' trust which is exempt from tax for his benefit, (3) for the purchase of an annuity contract for the individual under a plan whichm meets specified requirements of, or (4) to or under a qualified bond purchase plan, for his benefit. Outlines special rules and limitation under this Act for persons over 70 l/2 years of age, married persons; employer contributions and recontributed amounts.

Outlines those special rules and definitions applying to trusts qualifying as individual retirement account.

Outlines those rules with respect to tax treatment of distribution from individual retirement accounts.

Imposes for each taxable year on the assets of a qualified individual retirement account which is exempt from tax a tax equal to 10 percent of an amount which bears the same ratio to the fair market value of the total assets in such account at the beginning of the taxable year as the minimum amount required to be distributed during such year reduced (but not below zero) by the total amount actually distributed during such year by the account to the individual who established such account his or beneficiary bears to the minimum amount required to be distributed during such year.

Directs that the tax imposed by this provision shall apply only for taxable years beginning after the taxable year in which the individual who established such account attains the age of 70 l/2 years.

Establishes special rules for contributions on behalf of self-employed individuals and share holder-employees of electing small business corporations.

Imposes a tax with respect to qualified pension profit sharing and stock bonus plans on each prohibited transaction at the rate of 5 percent of the amount involved with respect to the prohibited transaction for each year in the taxable period.

Defines "prohibited transaction" as that term is set forth under the Welfare and Pension Plans Disclosure Act of August 28, 1958, as amended. Makes conforming amendments under this section.

Outlines rules applicable to custodial accounts and excess contributions.

Specifies those amounts from the employer's contribution which should be included in gross income by the employee.