1. Concept
The Employees' Retirement Benefit Guarantee Act
Chapter 2. Severance Pay System
Article 8 (Establishment of Severance Pay System)
① An employer who intends to set up a severance pay system shall set up the system in a way that it can pay workers who retire 30 days or more of average wages for each year of their consecutive service as severance pay.
② Notwithstanding the provisions of paragraph (1), an employer may, in cases where a worker demands, pay the worker the amount of severance pay corresponding to his/her consecutive service period earlier than his/her retirement. In this case, the consecutive service period to be used for the calculation of the amount of severance pay accumulated thereafter shall be reckoned anew from the time when balances were settled.
Chapter 3. Establishment of Retirement Pension Plan
Article 2 (Definition)
7. icle 2 (Definition)nt of Retirement Pensi refers to a retirement pension plan under which the level of benefits a worker will receive is determined in advance.
8. icle 2 (Definition)nt of Retirement Pensi refers to a retirement pension plan under which the level of benefits a worker will receive should make to pay benefits is determined in advance.

The Retirement Benefit Plan consists of the Severance Pay Plan, Defined Benefit Retirement Pension Plan, and Defined Contribution Retirement Pension Plan. The three plans are equivalent in value. Companies established since December 2005 are required to carry one or more of the three plans.

As there is no provision on qualifying causes of retirement for entitlement to severance pay, an employer shall give severance pay in all cases of termination of the employment relationship due to the employee's resignation or death, the company's disorganization, completion of the work, his/her having reached the retiring age, or his/her being dismissed for disciplinary reasons.

2. Severance Pay System

(1) Requirements of severance pay

1) Those eligible for severance pay shall be an employee under the Labor Standards Act.
① Whether to pay severance pay to an employee who was appointed as a company director
In cases where an employee was appointed as company director without terminating employment, the matters related to severance pay shall be evaluated as follows: ⓐ In cases where the director fulfills his duties with the authority of a representative director or executive director commissioned by the company by means of commercial law and civil law and receives a service charge, the director cannot be deemed an employee under the Labor Standards Act. Therefore, his severance pay occurs from the time when he was appointed as director(on the terminated date of employment by the LSA). The negative prescription is also calculated from the same date. ⓑ In cases where, despite the director’s title, he maintains subordinate employment with the employer and is actually in an employee position, the severance pay occurs from the time when the director resigned from the company. The negative prescription is also calculated from the same date. Labor Ministry Guidelines: Wage 68200-814 2001.11.27.


② How to calculate severance pay for a person assigned to a regular position from that of a daily worker
The consecutive years of employment to calculate severance pay for an employee who worked for the company as a daily worker but was reemployed as a regular employee shall be considered collectively based on the concrete facts as follows: If a temporary employee quit his temporary position, the employer accepted it, and he followed employment procedures by applying for a regular position, his previous labor contract was terminated effectively regardless of the new employment. However, if the temporary employee was rehired to a regular position while maintaining temporary employment, this is only a transfer to a regular position from an irregular position and his employment cannot be deemed effectively terminated. Labor Ministry Guidelines: Wage 68207-581 2000.11.14.


③ When a retired employee was rehired at the same company, the employer cannot make a special contract that excuses the employer from severance pay obligations, as this violates a compulsory law. The agreement becomes null and void.
When rehiring a retired employee, the company shall pay severance pay to the employee whose service period has become more than one year after the re-employment. Even though both parties agreed there would be no severance pay, this agreement violates a compulsory law and becomes null and void. Labor Ministry Guidelines: Kungi 68207-584 1999.03.12

④ Whether a full-time lecturer at an entrance exam institute is entitled to severance pay
If a full-time lecturer registered as an individual service provider provided labor service to the employer under substantial employment relations, he/she can receive severance pay. Whether or not a person is an employee under the Labor Standards Act shall be determined by whether the employee provides labor service to the employer under subordinate relations for the purpose of wages in a business or workplace regardless of the contract type. Full-time lecturers at the institute worked every day(6 days per week), which was distinct from other part-time lecturers, received a fixed amount of wages, and observed service regulations and personnel regulations such as starting time and finishing time. They are therefore employees who provide labor service under subordinate relations. Seoul District Court ruling on Nov. 10, 2006, 2004Gadan69638.


⑤ If a person has continuously maintained daily employment formally as a daily employee, the Labor Standards Act shall be applied to them and the employer shall pay severance pay to the daily employee who has served more than one year.
If a person has been a daily worker formally but maintained daily employment without cessation, he/she shall be considered a regular employee. It is not true that the continuity of employment shall be estimated by the employees providing an average of 25 days or more of work per month, but also by the employee providing 4 to 15 days on average every month. As daily employees have provided labor service for 4 or 5 days every month without exception, they shall be considered continuously employed and the Labor Standards Act shall be applied to them. Seoul District Court ruling on Apr. 19, 95Gahap11509.


⑥ The Labor Standards Act applies to illegal migrant employees, and they are entitled to severance pay.
The term “employee” used in Article 2 of the Labor Standards Act means a person, regardless of occupation, who offers work to a business or workplace for the purpose of earning wages. In Article 6 of the Act, an employer shall not take discriminatory action in relation to the working conditions on the grounds of nationality. The Labor Standards Act is applicable to foreign migrant employees, unless there are special reasons otherwise. Accordingly, the rules of severance pay stipulated in the Labor Standards Act apply to illegal migrant employees. Supreme Court ruling on Aug. 26, 1997, 97Da18875.


2) Consecutive years of employment: The employee shall serve continuously for more than one year.
Years of continuous employment refer to the period from the time when the employee began working for the company to the time when the employee resigned from the company.
① The period of disciplinary ‘suspension from worklinary ent refer to th own reasons shall be included in the period of continuous employment, which is the basic data for calculating severance pay, if a person maintains subsidiary employment relations with his employer. Labor Ministry Guidelines: Retirement benefit security team-1596.

According to Article 8(1) of the Employee Retirement Benefit Security Act, an employer shall pay severance pay equivalent to the average wage for thirty days or more for each one year of continuous employment. The period of continuous employment in this Act means “the period from the establishment of labor contract to its termination.” The period in which the employee did not provide labor service, but was under subordinate employment relations with an employer, shall be included into the period of continuous employment for calculating severance pay. Accordingly, the period of disciplinary ‘suspension from work’ due to the employee’s own reasons shall be included in the period of continuous employment as the basic data for calculating severance pay, so long as an employee has maintained subsidiary employment relations with his employer.

② The consecutive years of employment to calculate severance pay shall include the total period of employment, excluding the period of time when the employer ordinarily hired less than five employees.(This is effective before December 2010, but after this period, all employees are applicable.)
The severance pay according to Article 4 and 8 of the Employee Retirement Benefit Security Act applies to all businesses or workplaces in which not fewer than five employees are ordinarily employed. In cases where the company has maintained five or more in the ordinary number of employees for a long period of time, but the number of employees were reduced to fewer than five employees for a certain period of time, the consecutive years of employment to calculate severance pay shall include the total period of employment, excluding the period of time when the employer ordinarily hired fewer than five employees. Labor Ministry Guidelines: Retirement benefit security team-2582,2006.07.20.


(2) Calculation of severance pay
Severance pay shall be 30 days or more of average wage for each year of consecutive service. The period for continuous employment shall include suspension from work, service as a full-time labor officer of a Labor Union, labor service as a daily employee, detention periods from a criminal case, probationary periods, periods of strike, periods of absence, periods of suspension of service, suspension from work owing to personal illness, etc. However, military service period shall not be included in continuous employment.
① ‘Suspension period from work’ due to the employeerom work’ys oeasons shall be included in the period for calculating average wages.
Average wage to calculate severance pay by Article 2 of the Labor Standards Act means the amount calculated by dividing the total amount of wages paid to a relevant employee during the three calendar months immediately before the day on which a cause for calculating his average wages occurred by the total number of calendar days during those three months. When the amount calculated in this method is lower than that of the ordinary wage of the employee concerned, the amount of the ordinary wage shall be deemed his average wages. In cases where the period of calculating average wages includes a period of time falling under any of Subparagraph 1 to 8 of Article 2(1) of the Enforcement Decree of the LSA, the period and wages paid for that period shall be deducted respectively from a basis period for the calculation of average wages and the total amount of average wage. However, the period in which the employee did not provide labor service due to his own reasons, such as absence, shall not be excluded from the basis period for the calculation of average wages. Accordingly, in cases where the employee did not provide labor service during the basis period to calculate severance pay due to his personal reason like absence, the identical period shall be included into a basis period of average wages and calculated for severance pay. Labor Ministry Guidelines: Wages 68207-132,2003.02.27.


② How to include bonuses paid through one year into the amount subject to the calculation of average wages.
There are no regulations stipulated in the labor laws about the matters concerning payment of bonuses, but bonuses shall be deemed wages as remuneration for work when they are stipulated in the Rules of Employment for payment conditions, amount, and payment period, or when they have been paid so habitually to all employees that the employee may have natural expectations to receive a bonus as a matter of course. On the other hand, in cases where the payment rate of bonuses was established per year-unit and paid for the period exceeding one month, the total amount of bonus paid for a certain month shall not be included into calculation of average wages. The bonuses shall be calculated by dividing the total amount of bonuses paid to a relevant employee during the twelve calendar months before the day on which a cause for calculating his average wages occurred by the total number of calendar months, which is 3/12 times the total amount of bonuses paid per year. Labor Ministry Guidelines: Wages 68207-120.


③ In cases where the severance pay regulation has been revised justifiably in the middle of the consecutive work period, the calculation of severance pay shall be applied to the severance pay regulation effective at the time of retirement. The calculation shall not be applied differently by dividing the period before or after the revision of the severance pay regulation. Supreme Court ruling on Sept. 10, 1996, 95Da15414.

(3) Prohibition of discriminating system for severance pay
① 3Discriminating severance pay between full-time employees and part- time employees violates the principle of prohibition for different application. Seoul District Court ruling on Oct. 20, 2000, 2000Kahap8606.

Article 34(2) of the Labor Standards Act prohibits establishment of different severance pay systems according to job classification, title, business classification, etc. in one workplace and requires one severance pay system. If a company differentiates its application of severance pay between full-time employees and part-time employees, it violates the principle of prohibition against discrimination. Even though the company hired full-time employees and part-time employees differently and applied them differently in the hiring procedures, job characteristics, promotion/transfer, etc., the discrimination of severance pay shall not be justified without reasonable cause.

② That the company included the amount equivalent to severance pay into the monthly wage for foreign pilots was the establishment of a different application between foreign employees and native employees. Supreme Court ruling on Mar. 27, 1998, 97Da19725.

If the company agreed to include the amount equivalent to severance pay into the monthly wage for foreign pilots, it means that the company will not pay severance pay at the time of retirement for foreign pilots. This is a different system of severance pay, prohibited by Article 28(2) of the previous Labor Standards Act, compared to the native pilots who receive severance pay when quitting their jobs. Therefore, foreign pilots can apply for severance pay by the Rules of Employment applying to the majority of employees.
③ If there are two different applications of severance pay-e.g. the Rules of Employment regulating a cumulative severance pay system for native employees and individual employment contracts regulating a singular severance pay system for foreign workers-this violates the regulation to prohibit different application of severance pay. Supreme Court ruling on Nov. 28, 1997, 97Da24511.


(4) How to pay severance pay
Interim severance pay is implemented only in cases where the employee demands it, but the employer does not have a duty to agree to the employee's demand. Even if there are relevant regulations regarding the interim severance pay system in the Rules of Employment or the Collective Bargaining Agreement, individual employees must request it concretely and then it can be handled as an adjustment of interim severance pay.

① In cases where reason to reduce severance pay occurred after payment of interim severance pay, such as abolition of a cumulative severance pay system, the reduced severance pay system applies to that company. The reduced severance pay system calculates both the previously paid interim severance pay and final severance pay, and the company may pay severance pay after deducting the amount already paid. Labor Ministry Guidelines: Wage policy team-1173, 2004.04.08.

According to Article 34(1) of the Labor Standards Act, the liability of an employer’s severance pay occurs when the employment was terminated. However, by Article 34(3) of the LSA, an employer may, upon the request of an employee, even before his/her retirement, pay severance pay calculated on the basis of consecutive years of employment. Interim severance pay does not have different characteristics from normal severance pay. In cases where reason to reduce severance pay occurred after payment of interim severance pay, the reduced severance pay system shall apply to that company, the company will calculate the previously paid interim severance pay and the final amount of severance pay, and then the company may pay severance pay(or expect refund of overpaid severance pay) after deducting the amount it already paid as interim severance pay. Supreme Court ruling on May 6, 2003, 2001Da54977.


② Is it possible to pay interim severance pay for all employees with the consent of the majority of employees Labor Ministry Guidelines: Wages 68200-111, 2002.02.20.

According to Article 34 (3) of the Labor Standards Act, an employer may, upon a request of an employee, even before his retirement, pay a severance pay calculated on the basis of consecutive years of employment. In this case, the number of consecutive years of employment for the calculation of a severance pay after such advance payment shall be reckoned anew from the moment of the latest adjustment of balances. Although this interim severance pay was established previously for the relevant regulation or criteria of the interim severance pay in the collective bargaining agreement or rules of employment, it shall require individual employees’ concrete demands before its implementation. Accordingly, even with the consent of more than 50% of the total number of employees, the employer cannot satisfy the requirements needed for interim severance pay to all the employees.

③ Even though the company has paid some amount as severance pay in the wages paid every month, it cannot be accepted as payment of severance pay. Supreme Court ruling on Mar. 11, 2005, 2005Do467.

The severance pay stipulated in Article 34(1) of the Labor Standards Act occurs on the condition of termination of employment relations, and, in principle, it will not occur during the middle of the labor contract. Even if the employer agreed with the employee on payment of a certain amount of money as severance pay inside wages paid every month, this cannot be valid as payment of severance pay stipulated in Article 34(1) of the Labor Standards Act.

④ It is null and void due to violation of the Labor Standards Act if an employee signs a special contract giving up the right to request severance pay or not to launch a civil suit. Supreme Court ruling on Aug. 23, 2002, 2001Da41568.

Severance pay is the remuneration characteristic of deferred wages to be paid in return for continuous employment to the employee who retires after serving a certain period of time. The concrete right to request severance pay occurs on condition of the fact of termination of continuous employment. If an employee previously signed a special contract giving up the employee's right to request severance pay at the time of retirement or to launch a civil suit, it is null and void due to violation of the Labor Standards Act's compulsory regulation.
        
3. The Retirement Pension Plan

(1) Concept
Before December 2005, there were only two types of retirement payments stipulated in the Labor Standards Act: the Statutory Severance Pay Plan to be paid upon resignation and the Interim Severance Pay Plan which could be paid while the employee was still employed. However, in December 2005, the Employee Retirement Benefit Security Act (hereinafter referred to as the ERBS Act) was enacted and introduced something new: the Retirement Pension Plan, which can take the form of either a Severance Pay System or a Retirement Pension Plan. The Retirement Pension Plan is also further broken down into three types: the Defined Benefit Plan, the Defined Contribution Plan and the Individual Retirement Plan. Under these plans and upon retirement, employees can receive gains made from investment of their pension funds, either as a lump sum or monthly pension from an outside financial agency.
The ERBS Act, revised July 26, 2012, strengthened the Retirement Benefit Plan to ensure the retirement benefit is used as income during old age, rather than extra income before retirement. Interim severance payments are now restricted, and one of only seven reasons must exist. Enforcement Decree (Article 3) of the Employee Retirement Pension Security Act (Reasons for Interim Severance Pay) ①
1. Where an employee who has not owned a house has purchased a house in his/her own name;
2. Where an employee who has not owned a house makes a key money deposit (according to Article 303 of the Civil Act) or a security deposit (according to Article 3-2 of the Housing Lease Protection Act) for the purpose of moving into a residence. In this case the employee can only apply for the retirement pension one time during employment in a company or business;
3. Where an employee, employee's spouse according to Article 50 (Paragraph 1) of the Income Tax Act, or his/her dependent family member has received medical care for six months or more;
4. Where an employee has been declared bankrupt under the Debtor Rehabilitation and Bankruptcy Act within five years from the time of providing the retirement reserve as collateral;
5. Where an employee has received a decision for commencement of a rehabilitation proceeding under the Debtor Rehabilitation and Bankruptcy Act within five years from the time of providing the retirement reserve as collateral;
6. Where wages are decreasing due to the Wage Peak System according to rules from Paragraph 1 ~ 3 of Article 28 (1) of the Enforcement Decree of the Employment Insurance Act; and
7. Where other reasons and conditions prescribed by Ordinance of the Ministry of Employment and Labor, such as natural disasters, etc., are met.
The Individual Retirement Plan has also been introduced. In cases where retirement pension holders resign before retirement, opening of an IRP is mandatory, and funds are transferred as a lump sum from the previous employer to either the new employer's pension plan, or an IRP account. The accumulated retirement benefit in this IRP account will, by law, be kept and managed until the employee is 55.

(2) Differences between the Severance Pay System and the Retirement Pension Plan
The differences between the Retirement Pension Plan and the Severance Pay System are as follows:
① Under the Retirement Pension Plan, the company deposits the retirement contributions with an outside financial agency, and the employee receives a retirement benefit from the financial agency upon resignation. Under the Severance Pay System, the employer pays a pre-determined amount in severance pay upon employee resignation.

② The Defined Benefit Plan is the same as the severance pay system, with the amount calculated in the same way: multiplying the average wage for each of the most recent three months by the years of service. The Defined Contribution Plan requires a deposit of 1/12 of the employee's annual salary every year, with the individual retirement benefit varying according to performance of fund investments.
③ In cases where an employee receives a lump sum from the Retirement Pension Plan, he/she shall receive it into an IRP. However, under the Severance Pay System, the employee can still receive a lump sum as before, as there is no obligation to transfer to an IRP in the Severance Pay System. However, the employee can open an IRP account and receive payment there if He/she wishes.

④ The Retirement Pension Plan guarantees the principal funds contributed, as they are managed by an outside agency. Under the Defined Benefit Plan also, the principal deposited outside is guaranteed. However, the Severance Pay System has a weakness in that should the company go bankrupt, the funds may not be available, since they were deposited within the company.

⑤ The Retirement Pension Plan requires regular retirement contributions to an outside agency, which can reduce the company's financial burden as it does not have to pay out large amounts upon resignation, contrary to the severance pay system. As the severance pay should be paid in full as a lump sum upon retirement, the company will have a heavier financial burden.

(3) Necessity for and Concept of the Retirement Pension Plan

1) Necessity for the Retirement Pension Plan
From the employee's perspective, the reasons necessitating the Retirement Pension Plan are as follows: Firstly, it is necessary to supplement the social welfare system. Currently, most people depend on the National Pension only. However, this is not enough for necessities. With three levels of social security (National Pension, Retirement Pension, and Individual Pension), the employee will be far better prepared. Secondly, it is necessary to protect the right for employees to secure their retirement benefits. If the company goes bankrupt, the employee will most likely not receive wages of any kind. To ensure benefits do not remain unpaid, companies shall deposit their contributions at an outside financial agency through the Retirement Pension Plan.

From the employer's perspective, the reasons necessitating the Retirement Pension Plan are as follows: Firstly, companies can reduce corporate tax through the Retirement Pension Plan. Only 20% of the retirement benefit reserve each year can be considered business expenses, and each year this percentage will be reduced 5% until 2016, when there will be no tax benefit at all. However, 100% of retirement reserve for the Retirement Pension Plan can be claimed as a tax deduction each year. Secondly, the Defined Benefit Plan aids in reducing company debt, as the retirement pension deposit is deducted from the retirement reserve. The Defined Contribution plan allows the total amount the company has paid into the retirement benefit each fiscal year to be regarded as actual retirement payout, thereby reducing company debt. Thirdly, companies introducing the Retirement Pension Plan can also save from a reduction in wage claim premiums: 50% of the premiums multiplied by the guaranteed rate covered by the Defined Contribution retirement benefit.

2) Introduction of the Retirement Pension Plan
The employer shall establish pension regulations, obtain the consent of the employee representative, and permission from the Ministry of Employment & Labor before introducing the Retirement Pension Plan. Upon employee retirement, the financial agency shall pay out a lump sum or a regular pension from the retirement fund the employer deposited. The retirement pension company (trustee) will be a financial agency such as a bank, insurance company, or securities firm, and perform operational management and asset management. Operational management includes designing of the retirement pension, operational method of the assets, and administration. Asset management includes such tasks as depositing contributions and paying out retirement benefits, maintaining and managing assets, establishing and managing/operating the account.

(4) Types of Retirement Pension Plan

1) The Defined Benefit Retirement Plan (DB)
① Concept: Under the Defined Benefit plan the company deposits 60% or more of the retirement contributions expected for the year to an outside agency, and the financial agency pays 100% of the retirement benefit within its obligation to pay. The Minimum Reserve is the amount equivalent to 60% of the Standard Mandatory Reserve from July 26, 2012 to the end of 2013. After this period, the Minimum Reserve is to increase 10% every two years, becoming 70% of the Standard Mandatory Reserve from 2014 to the end of 2015, then 80% of the Standard Mandatory Reserve from 2016 to the end of 2017, and the rate stipulated by decree of the Minister of Employment & Labor from 2018 on.

The Defined Benefit plan is characterized by a prior confirmation of the severance payment. This is calculated in the same way as in the existing Severance Pay System, and is equal to the final month's total wage. Severance pay is calculated by multiplying the average monthly wage (over the final 3 months) before resignation/retirement by the years of service.

② Characteristics: As the amount of retirement benefit is determined beforehand, plans for the retirement years are possible. As the company contributes to and manages the retirement reserve directly, the employee is free of those responsibilities. One disadvantage is that transferring the retirement deposits to another company is difficult. Depositing additional money or withdrawing money early is not allowed by law, but it is possible to borrow the money as a secured loan, for the following purposes: 1. First-time purchase of a house; 2. Medical treatment for 6 months or longer for the employee or his/her dependents; 3. Decision for commencement of a rehabilitation proceeding; 4. Bankruptcy; or 5. Other reasons and conditions such as natural disasters, etc., prescribed by Ordinance of the Ministry of Employment & Labor. The DB Plan is suitable for companies with job security, low turnover, and who provide high salary increases.

③ Conditions for eligibility: The employee receives retirement pension or lump sum allowance upon retirement. The retirement pension is eligible for those who are 55 years old or older and have subscribed to it for 10 years or more. In this case, the beneficiary period shall be 5 years or longer. The lump sum payment is paid to those who were not eligible for pension and who want to receive it as a lump sum payment. This lump sum payment means that the retirement benefit is transferred to the IRP account.

2) The Defined Contribution Retirement Plan (DC)
① Concept: The level of contribution the employer and employee make is predetermined by pension law, with the employee's final retirement benefit determined by the company's contributions and the employee's investment gains. Investment outcomes are up to the employee and the final payment depends on the performance of his or her investments. The employer deposits 1/12 of the employee's annual salary every year. A retirement payment is deposited every month, like an interim severance payment. Final payout is determined by performance of the employee's investments. The employee's retirement benefit is equal to company contributions and investment returns.

② Characteristics: Employees can put additional money into this fund. As the fund is separately managed, it is easy to move it to another company, plus, payout can be higher than the Defined Benefit plan if the investment returns are good. However, management of the retirement funds is at the risk of each employee, who is responsible for choosing appropriate investments. The companies that are more suited to the Defined Contribution plan are 1) Companies with lower salary increases and 2) Companies implementing an annual salary system.

③ Conditions for eligibility: The employer deposits 1/12 of the employee's annual salary every year. The employee manages the retirement fund, and will receive it as a monthly pension or lump sump payment upon retirement. The retirement pension is eligible for those who are 55 years old or older and have subscribed to for 10 years or more. In this case, the beneficiary period shall be 5 years or longer. The lump sum payment is paid to those who were not eligible for pension or who want to receive it as a lump sum payment. This lump sum payment means that the retirement benefit is transferred to the IRP account.

The Defined Contribution Plan holder can legally withdraw the deposit or borrow the money as a secured loan during employment for the following reasons: 1) First-time purchase of a house; 2) Medical treatment for 6 months or longer for the employee or his/her dependents; 3) Decision for commencement of a rehabilitation proceeding; 4) Bankruptcy; or 5) Other reasons and conditions such as natural disasters, etc., prescribed by Ordinance of the Ministry of Employment & Labor.
        
3) The Individual Retirement Plan (IRP)
① Concept: The Individual Retirement Plan can take the form of a Company IRP or an individual IRP. The Company IRP is a retirement pension plan as described in the Employee Retirement Benefit Security Act and is acceptable as a retirement benefit scheme for companies that employ 9 or fewer employees. It operates in basically the same way as the Defined Contribution plan, but companies do not have to create the pension rules. In cases where the company later employs 10 or more employees, the Defined Contribution plan shall be adopted. The Individual IRP was designed for the employee to be able to manage his or her own retirement benefit until retirement or until receiving it if resignation occurs earlier.

② Characteristics/ Conditions for eligibility: Under the Retirement Pension Plan, when the employee resigns or retires, the retirement benefit shall be transferred to an IRP. Upon reaching the age of 55, the employee can receive a regular retirement pension or lump sum payment. The IRP reserve cannot be withdrawn earlier than the required age except for the legal reasons described in Article 2 of the Enforcement Decree of the ERBS Act: Reasons for Offering Right to Receive Benefits as Collateral. However, The Retirement Pension Plan (DB, DC, Company IRP) shall be transferred to the IRP except in the following situations: 1) The subscriber receives payment after age 55 upon retirement; 2) The subscriber returns the borrowed money with wage collateral; 3) The retirement fund is equal to 1.5 million won or less, as stipulated by the Minister of Employment & Labor.

(4) Comments
Although the Retirement Pension plans were introduced in December 2005, they have not yet been widely used due to the existing severance pay system. However, recent revisions to related law restricts interim severance payment and provides many incentives to introduce the Retirement Pension plans, incentives which are expected to gradually increase use of the Retirement Pension plans. Retirement benefits have often been used as an
additional bonus to normal wages. However, they should be used as retirement benefits to supplement old-age security. Accordingly, these Retirement Pension plans should be encouraged further to help people have the funds they will need, through strategic government support. Employees also need to recognize that the retirement benefit is not money to be spent on pre-retirement costs, but is to be saved as a matter of course to prepare for the golden years.