Eight months have passed since the 22nd National Assembly was opened, but discussions on pension reform have yet to gain momentum. While the People Power Party agreed with the notion of prioritizing 'reform of basic formulas,' the discussions have stalled due to disagreements over where to hold them. There are calls for both parties to compromise and promptly begin discussions on pension reform.
Recently, the People Power Party shifted its stance regarding the National Pension discussion, stating that "we can begin by discussing reform of basic formulas." Kim Sang-hoon, the policy committee chair of the People Power Party, said at a meeting of the party's floor strategy committee on the 7th that "we proposed to establish a special committee on pensions at the National Assembly to discuss reform of basic formulas and structural reform together, but we suggested that reform of basic formulas could be discussed first at the special committee level." The day before, Kwon Young-se, the chair of the emergency response committee, also noted that "if reform of basic formulas is easier, it is necessary to discuss that first."
Reform of basic formulas refers to the reallocation of the ratio between the insurance premium rate (the money paid) and the income replacement rate (the money received) in the pension system. Structural reform is aimed at changing the entire framework of the pension system, including the National Pension, basic pension, and retirement pension. The ruling party has maintained that it cannot negotiate unless both reforms occur simultaneously. However, due to the serious financial situation of the pension system, it appears that they are shifting towards discussing the reform of basic formulas first, as it has a higher possibility of agreement. According to the Ministry of Health and Welfare's 5th financial projection for the National Pension in 2023, the pension is expected to be depleted by 2055.
If discussions gain traction, there is a high likelihood that both parties can reach an agreement on the reform of basic formulas. During the last 21st National Assembly, after 1 year and 10 months of discussions, both parties essentially agreed to raise the insurance premium rate from the current 9% to 13%. The income replacement rate has also narrowed down to between 42% (last year) and 44%. At that time, the Democratic Party argued for an increase to 45%, while the People Power Party suggested 43%, showing a 2 percentage point discrepancy. Although the Democratic Party proposed an adjustment to 44%, the processing of the pension law fell through as the government and ruling party insisted that "structural reform must be carried out simultaneously."
Chairperson Kim told the press, "(The insurance premium rate) is in a state where there are no differences between the ruling and opposition parties. The income replacement rate is set at 44% by the Democratic Party, and I believe it can be reached quickly once the special committee is formed for negotiation. We can resolve it promptly."
The contentious point is where to discuss pension reform. The Democratic Party argues that since there is not much difference in positions regarding reform of basic formulas, discussions should be conducted swiftly in the standing committee (the Health and Welfare Committee). A source from the office of Park Joo-min, the chairperson of the Health and Welfare Committee, stated, "Discussions on reform of basic formulas have been underway since the 21st National Assembly, and even if we go to a special committee, we still need to pass the welfare committee bill for a resolution, so there is no reason not to do it in the welfare committee," adding that "the ruling party is merely using the special committee as an excuse to delay time."
In contrast, the ruling party is insisting that a National Assembly special committee for pension reform must be established. They argue that even if reform of basic formulas takes place, the interrelationship with the basic pension and other pensions must be considered, and discussions should occur in a special committee with the involvement of affiliated members and related ministries, such as the Planning and Finance Committee and the Environment and Labor Committee.
Chairperson Kim remarked, "Although it is reform of basic formulas, there are various stakeholders and generations involved in the pension system. Therefore, solely discussing it in the welfare committee would be impractical. It would be better for the special committee, with an equal number of members from both parties, to actively discuss it and reach a conclusion. Additionally, since the pension law is set to be established, it would be better for the pension special committee with legislative authority to reach a prompt conclusion."
The standing committee is formed according to the proportion of members from the negotiating groups. In contrast, special committees are typically composed of an equal number of members from both parties, with the chairperson being from the ruling party. Thus, there is an interpretation that both parties are in a power struggle to take the lead in discussions on pension reform. However, the ruling party has stated that it can also concede the position of the special committee chairperson to the Democratic Party.
There is also a possibility for both parties to find common ground in behind-the-scenes negotiations. National Assembly Chairperson Woo Won-sik is reportedly mediating with the opposition to propose establishing a special committee for discussions. A compromise plan has also emerged, stating that the agreed insurance premium rate should be processed in the welfare committee as per the opposition's claim, while other proposals should be handled by the special committee. Kim Mi-ae, the ruling party's secretary for the welfare committee, suggested on Facebook that "it would be feasible to prioritize processing the increase to a 13% insurance premium rate first and discuss the rest, including the income replacement rate, in the special committee."
As both parties remain at odds over the establishment of the special committee, the government, ruling party, and opposition summit originally scheduled for the 10th or 11th has been postponed. Discussions regarding the supplementary budget bill for stimulating domestic demand seem to have also encountered obstacles. The ruling party maintains that issues such as the formation of the pension special committee and the introduction of a clause for 'exceptions to the 52-hour workweek' in the semiconductor special law must be resolved before substantive discussions on the supplementary budget can proceed.
There are concerns that both parties must approach discussions on pension reform with 'sincerity' and begin promptly. Jo Jin-man, a professor at Duksung Women's University, stated, "If (the ruling and opposition parties) have the will, they can reach an agreement together. Using form as an excuse not to agree on reform of basic formulas is a fundamental misalignment," adding that "the failure to even form a special committee showcases the current reality of Korean politics."