MOEL Interpretation

Severance Pay Act

Defined Benefit Retirement Pension Plan (DB Plan)


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46. Whether a defined benefit (DB) plan rule can stipulate that “Contributions shall be paid at the end of each month; however, the payment timing may be changed according to the asset management contract.” Whether a defined contribution (DC) plan rule can state that “The employer shall pay the contribution, equivalent to 1/12 of each participant’s monthly total wage, in cash to the asset management institution by the 5th of each month; however, the timing of payment may be changed according to the asset management contract.” Whether the contract date and contribution payment date in the management and asset management contracts should be based on the plan’s effective date as specified in the rules.
45.● When a company adopts an additional benefit clause in a retirement pension plan beyond the standard retirement benefit (30 days’ average wage), is it required, as with companies using a progressive system, to accrue the additional retirement benefit amount as retirement pension reserves annually at settlement?
44.● If the working period from March 1, 2007, to February 28, 2012, is subject to the retirement allowance system, and the working period from March 1, 2012, to February 28, 2016, is subject to the defined benefit retirement pension system, how should the retirement reserves be calculated upon retirement as of March 1, 2016?
43. There is an administrative interpretation (Retirement Benefits Security Team-3846, 2006.10.12) stating that management performance bonuses (incentives), whose payment and amount depend on the company’s performance, can be additionally paid as employer contributions to a defined contribution (DC) plan. – When both defined benefit (DB) and defined contribution (DC) plans are introduced and employees can choose between them, can this interpretation be applied, or does it apply only when the DC plan is introduced? In a workplace where DB, DC, and hybrid retirement pension systems are all established, can the payment levels set in the DB and DC regulations be set differently in the hybrid retirement pension regulations? Can a single employee be enrolled as a DC participant with multiple retirement pension providers?
42.According to Article 32(4)(3) of the 「Employee Retirement Benefits Security Act」, the average wage is calculated as of January 1, 2020, the point of work hour reduction, and it was agreed with the employee representative (labor union) to perform an interim calculation of the defined benefit (DB) retirement pension. If wage negotiations (collective agreement) result in a retroactive wage increase for the negotiation period (May 2019 to April 2020), can this be reflected in the interim calculation of retirement benefits?
41. How to calculate retirement benefits for an employee who has been enrolled in the DB system (11 years) and the Korea Institute of Science and Technology Pension (3 years) upon retirement Whether the amounts paid to the Korea Institute of Science and Technology Pension can be reclaimed by the company, and the retirement benefits can be calculated and paid under the DB system for the entire continuous service period at retirement If, due to implementation of a wage peak system, the average wage for past continuous service was calculated based on the pre-peak wage standard, but the employee’s wages have been adjusted to a higher level than previously calculated, whether the average wage can be adjusted accordingly to calculate the retirement benefits
40. Advantages of retirement pension subscribing workplaces compared to non-subscribing workplaces Minimum funding ratio level relative to the actuarial liability in defined benefit (DB) retirement pension systems, and legal sanctions for failure to comply with the minimum funding ratio
39.Financial verification of the DB system must be conducted within 6 months after the end of each business year. Until 2013, the minimum funding ratio against the actuarial liability was 60%, and for 2014-2015, it was 70%. For a corporation whose business year ends in March 2014 but whose accounting fiscal year is 2013, should the minimum funding ratio for 2013 or for 2014 be applied?
38.If a company makes a lump-sum payment of retirement pension contributions before the end of the fiscal year and requests a re-conduct of the financial verification based on the payment timing, can the financial verification be re-conducted mid-year, and can the results reflecting an accumulation ratio exceeding the funding ratio specified in Article 5 of the Enforcement Decree of the Labor Standards Act be used as the basis for payment?
37.When including past service periods as enrollment periods at the time of introducing the DB-type retirement pension system, how should the minimum funding ratio be calculated if the average past service period changes due to the subscriber’s retirement or other reasons? □ Relevant Regulations ((Average Past Service Period×Minimum Funding Ratio for that period)+(Average Enrollment Period after Retirement Pension Setup×80%)) / Total Enrollment Period When including past service periods as enrollment periods at the time of setting up a DB-type retirement pension system, the minimum funding ratio should be calculated using a weighted average of the “average past service period and average enrollment period after retirement pension setup.” The minimum funding ratio for retroactively introduced past service periods is applied by calculating a weighted average of minimum funding ratios for future service periods and past service periods as specified in the retirement pension regulations by enrollment basis. The average past service period and enrollment period after retirement pension setup use the “average of all subscribers.”
36.Company A implements a wage peak system, whereby employees change from a DB-type retirement pension system to a DC-type system upon reaching a specific age (57). In this case, how should the ongoing liability be calculated according to Article 16(1) of the 「Employee Retirement Benefits Security Act」?
35.Regarding the interpretation of guidelines for the financial verification of defined benefit retirement pension systems: When full payment was being made exceeding the minimum funding ratio during financial verification, but an exception to full payment arises, at what point after calculating the funding ratio at the initial occurrence of the exception must subsequent processing be completed? Is there a regulation regarding the notification frequency of payment status relative to reserves and the appointment of a coordinating institution? What are the criteria and methods for notification when financial conditions change?
34.An employer who determines retirement amounts by a multiple in the articles of incorporation causes the funding ratio to decline during the financial verification of the defined benefit (DB) retirement pension system, and upon employee retirement, pays according to the funding ratio while the employer separately pays the shortfall. Is it possible to exclude the employer’s reserve fund when conducting financial verification?
33.In a workplace operating a DB-type retirement pension system, when a worker with a continuous service period of less than one year retires, can the employer request the return of the worker’s accrued retirement pension funds?
32.When a worker enrolled in a DB plan retires, the retirement pension provider is required to pay retirement benefits to the worker based on the ratio of reserves to the estimated retirement benefit amount. However, if the employer has fully paid the retirement benefits, can the amount accrued for that worker be used as a resource for paying retirement benefits to current employees?
31.In a corporation operating a DB-type retirement pension system, when a retirement occurs and the corporation pays the retirement pay from its own funds, can the corporation claim the retirement benefit payment from the retirement pension provider?
30.Under a defined benefit (DB) retirement pension system, when three asset management institutions A, B, and C are selected, which operation method is correct? – Total 300 employees are divided equally with 100 employees enrolled in each of A, B, and C, each with a 60% funding ratio. Each asset management institution performs pension calculations and contribution calculations separately. – All 300 employees are enrolled in all three institutions, each with a 20% funding ratio (total 60%).
29.When employees and executives enroll together in a retirement pension at one workplace, is it possible to separately operate retirement pension accounts and the retirement pension provider’s systems for employees and executives?
28.In a workplace with two defined benefit (DB) retirement pension providers (A and B), is employee representative consent required to transfer reserves from financial institution A to financial institution B?
27.According to Article 8(5) of the Enforcement Decree of the Employee Retirement Benefits Security Act, if the retirement benefit payments in a given business year amount to 25% or more of the reserves, the exception to full payment applies. When is the timing for determining whether the 25% threshold is met? Example case: On a certain day, five retirement benefit claims are filed; at the payment of the third claim, the total retirement benefit payments for the business year reach 25% or more of the reserves. Hypotheses: * Opinion A: If the ratio is 25% or more on the claim date, all claims on that day are paid based on the reserve ratio method. * Opinion B: If the ratio is 25% or more on the claim date, all claims on that day are paid in full or partially by claim, with some paid by the reserve ratio method. * Opinion C: If the ratio is 25% or more on the claim date, the reserve ratio method is applied starting from that claim onward.
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