Labor, management, and government agreed to introduce a fund-type retirement pension. It will be run in parallel with the existing contract-type system. They also decided to expand the external funding of retirement benefits to all business sites.
According to the Ministry of Employment and Labor (MOEL), the task force for strengthening the functions of retirement pensions issued a joint declaration at the Kensington Hotel in Yeouido, Seoul, on the 6th morning.
This declaration is the result of 10 meetings over about three months since the task force was launched in Oct. last year. Since the introduction of the retirement pension system in 2005, this is the first time that labor, management, and government have agreed on the direction for structural improvement of the system.
Specifically, labor, management, and government will introduce the fund-type retirement pension as a new option. Even within a single business site, both the contract type and the fund type can be introduced at the same time. The intent is to broaden the choices of business sites and subscribers. The fund-type retirement pension applies to defined contribution (DC) plans. Using the fund for purposes unrelated to subscribers' interests is prohibited.
The fund-type retirement pension will be operated in various forms, such as open funds run by financial institutions, union-type funds, and open funds run by public institutions. An open fund run by a financial institution is a system in which a private financial company establishes a separate trustee corporation and operates the accumulated funds of multiple business sites as a pooled fund. A union-type fund is a method in which multiple specific employers form a union to establish a joint trustee corporation and operate the retirement pension fund. In addition, the Small and Medium Business Retirement Pension Fund will gradually expand eligibility to business sites with 300 or fewer employees.
Labor, management, and government will also push to mandate the external funding of retirement benefits. However, it will be implemented in phases, taking into account the size and conditions of each business site. The specific timing and phases of implementation will be decided after a survey of micro and small to medium-sized enterprises. Workers' choices, such as interim withdrawals or lump-sum payments, will remain the same as under the current system.
Kim Young-hoon, Minister of the Ministry of Employment and Labor (MOEL), said this is "the starting point of an institutional transition to secure workers' income in old age," and noted that "we will actively push legal and institutional improvements so the agreed content can take root as a system."