KCCI "Uniform Regulations on Retirement Pensions Are Difficult for Companies to Bear"…Submitted Opinions to the National Assembly

[Asia Economy Reporter Kiho Sung] The Korea Employers Federation (KEF) submitted its opinion to the National Assembly regarding the "Partial Amendment to the Employee Retirement Benefit Security Act," stating that "uniform regulations related to retirement pensions are practically difficult for companies to bear."

On the 23rd, KEF stated in a position paper, "If the introduction of retirement pensions and compliance with minimum funding ratios are uniformly enforced without considering the diverse management conditions and industry characteristics of individual companies, it is practically impossible for companies to bear this, and there is a high risk of excessive legislation."

The bill recently proposed by Ahn Ho-young of the Democratic Party of Korea includes ▲ phased introduction of retirement pension systems by company size (a fine of 30 million KRW for violations), ▲ compliance with minimum funding ratios for defined benefit (DB) retirement pension subscribing workplaces (a fine of 10 million KRW for violations), and ▲ mandatory establishment of a reserve fund management committee and preparation of a reserve fund management plan for DB subscribing workplaces with 300 or more regular employees (a fine of 5 million KRW for violations).

KEF first pointed out, "The amendment stipulates that if a retirement pension is not introduced within the deadline set by company size, a fine of 30 million KRW, equivalent to the penalty for non-payment of retirement benefits, will be imposed. However, this is a typical case of excessive legislation that imposes administrative penalties by presuming workplaces without retirement pensions as potential non-payers of retirement benefits."

It continued, "Especially for companies that constantly experience profit and loss fluctuations and liquidity crises depending on economic conditions and industry characteristics, particularly small and micro enterprises, the introduction of retirement pensions is virtually impossible. Above all, the burden of large-scale external reserves and management fees that must be regularly paid after introduction is also difficult to bear in reality."

Regarding the mandatory compliance with minimum funding ratios, KEF said it causes double burdens, stating, "Forcing compliance with the minimum funding ratio for DB retirement pension subscribing workplaces (increasing from 90% to 100% starting next year) also contains the risk of excessive legislation that makes it difficult for companies to respond to management crises."

On the controversy over the effectiveness of additional obligations such as the formation of a reserve fund management committee, KEF emphasized, "Just because a separate in-house committee prepares a plan once a year or more does not mean that the reserve fund will be managed rationally or that profitability will improve. Rather, it is highly likely to increase costs and workload related to committee operations."

Kim Dong-wook, Head of Social Policy at KEF, said, “Rather than shock therapy focused solely on regulation, recognizing companies’ discretion in choosing retirement benefit systems based on their management decisions is more effective in protecting jobs and workers’ rights to receive retirement benefits.” He added, “It is desirable to induce system transition and actual funding through tax support such as expanding the tax-deductible rate for retirement pension reserves.”

This content was produced with the assistance of AI translation services.