|Ji Yeoun Kim|
The retirement pension plan in Korea first became available in 2005 after the passing of the Employee Retirement Benefit Security Act (ERBSA). At the time of introduction, adoption of the retirement pension plan was not obligatory and it could be determined with mutual agreement by the employer and the worker. The worker was free to choose a plan from among defined benefit (DB) plans under which the level of a worker's benefits is predetermined, or defined contribution (DC) plans under which the level of an employer's contribution is specified, and the worker retains the right to decide how the contribution should be managed.
In 2011, the ERBSA was amended extensively to strengthen and offer a greater range of rights to workers, and to allow for a more secure retirement. Once the amended Act becomes effective on July 26 2012, the volume of total pensions is expected to be expanded. This should be a pivotal factor in the financial investment market in the coming year.
Any new business established after the new Act enters into force will be required to select its preferred pension plan within one year of incorporation.
It is possible to implement a system which combines different attributes from DB and DC, allowing workers a greater range of choices.
New conditions have been introduced in respect of interim settlement of pension plans to allow for this in limited circumstances only, such as the purchase of a residential home.
Workers registered to retirement pension plans, small business owners, and so on, will now also be able to select an individual retirement pension plan so that contributions can be made independently.
Notifications must made by retirement pension trustee to users to inform them whether their annual contribution requirement has been met, in order to ensure there are no shortfalls.
Ji Yeoun Kim