MOEL Interpretation

Severance Pay Act

Defined Contribution Retirement Pension Plan (DC Plan)


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120.◉ Method of operating a retirement benefit system in a workplace that adopts a DC plan retroactively to include past continuous service periods How should contributions be calculated when applying the system retroactively? Can the retroactive application and contributions be implemented in phases? When introducing a DC plan, is retroactive application to past continuous service periods mandatory, or is it permissible to apply the system prospectively and settle the past period separately?
119. Is it possible to include only a portion of the past service period in the Defined Contribution (DC) plan participation period in order to convert part of the retirement benefit reserve into a DC plan? If only a portion of the past service period can be retroactively included in the DC participation period: * Is it possible to retroactively apply the plan only up to a specific past date for all participants of the business? * Is it possible to apply different retroactive periods to individual participants, and in such cases, must the retroactive proportion be the same for each individual? After the introduction of the system, would amending the retirement pension plan to retroactively include past service periods constitute a disadvantageous change? When a company under a DB plan amortizes past service liabilities (PSL) over a period (e.g., five years), how is each employee’s participation period calculated? (If the company retroactively includes the entire period of continuous service from the start, would this raise equity issues in comparison with DC plans as mentioned in Inquiry 2?)
118. When a DC plan participant dies or retires, is that day included in the participation period? If a past period is retroactively included in the participation period, is it also included in meeting the pension eligibility requirement (10 years of participation)? Can the period of service at a previous company operating a severance pay system be combined with the period of service at a new company operating a DC plan to satisfy pension eligibility? If an employee transfers from a company operating a DC plan to another DC-operating company, can the periods of service be combined? If a company previously operating a severance pay system introduces a DC plan without retroactively including past service, can the severance pay period be included in the 10-year participation requirement for pension eligibility? In the case of a DC plan, is it mandatory to include a clause on the statute of limitations for benefit claims in the retirement pension plan rules? If an employee makes additional contributions to a DC account, is the employee required to notify the employer of the intent and amount of the contribution? When a DC pension plan is introduced, the employer must notify employees of operational performance at least once a year. Can this duty be delegated to the retirement pension provider?
117.In a case where a worker employed by a contractor responsible for school cleaning is enrolled in a Defined Contribution (DC) retirement pension plan and is subject to a special agreement that excludes work and wage payments during school vacations: (1) If, excluding the vacation period, the employee’s actual working period is less than one year, is the employer exempt from making DC contributions? (2) Should the employer calculate the contribution by dividing the total wages earned over the actual 10 months of work by 12 months?
116.Facts: Employees subject to demotion policies or position caps (classified as a separate job grade) have experienced a decrease in wages, which results in a lower average wage at the time of retirement and, consequently, a reduced retirement benefit. Since this does not fall under any of the interim settlement grounds specified in Article 3 of the Enforcement Decree of the 「Guarantee of Workers’ Retirement Benefits Act」, interim settlement is not permitted. Inquiry 1 When introducing a Defined Contribution (DC) retirement pension plan, is it permissible to include a special provision in the retirement pension rules that retroactively applies the plan only to a specific job grade (e.g., AH level) where wages and retirement benefits have been reduced? Inquiry 2 (If retroactive application is permitted) From when can the retroactive application begin, and is the company obligated to apply it retroactively?
115.An employee worked at a nursing home in ○○ Province from October 18, 2015, to May 31, 2019. On January 1, 2019, the business owner changed, and the employment relationship with existing employees was comprehensively succeeded. After the change in ownership, the nursing home obtained consent from the employees and enrolled in a Defined Contribution (DC) retirement pension plan starting May 22, 2019. In this case, if the retirement benefit actually received through the DC plan is less than what would have been received under the severance pay system, and it appears that the DC plan participation period was retroactively applied to include the past service period, can this be considered a lawful retirement benefit payment?
114.According to a previous administrative interpretation (Retirement Benefit Security Team-1090, March 15, 2007), for periods of business suspension due to employer fault, contributions under the Defined Contribution (DC) retirement pension plan should be calculated by excluding wages paid during the suspension from the annual total wages and dividing by the number of months excluding the suspension period. However, when bonuses or holiday allowances are paid only once per year, applying the previous interpretation can result in a higher contribution calculation compared to employees who did not experience suspension. This creates an unfair disadvantage. Accordingly, please advise whether either of the following two interpretations is acceptable: For annual-based pay, apply the existing interpretation by excluding wages for the suspension period; for lump-sum payments made once per year, calculate contributions based on 1/12 of the annual total regardless of suspension. Apply the existing interpretation uniformly to both monthly wages and once-a-year payments by excluding wages and suspension periods in all cases.
113.If there is a regulation stating that retirement benefits are to be reduced by half in cases of dismissal due to misconduct, can both the employee’s and employer’s contributions under a Defined Contribution (DC) retirement pension plan be reduced accordingly?
112.Inquiry 1 In a workplace that has introduced a DC-type retirement pension plan, if the employer fails to pay the contributions, from when does the statute of limitations for unpaid contributions begin? Inquiry 2 If certain allowances paid to a member were not treated as wages due to uncertainty in their nature but are later recognized as wages, must contributions be retroactively recalculated and paid for the entire past period of employment? Inquiry 3 What penalties are imposed on the employer for failure to pay contributions, and how are late interest charges calculated? Inquiry 4 Is it permissible for the contributions already paid into the DC retirement pension plan to be forfeited based on mutual agreement between the member and the employer?
111.● In a workplace where the DC-type retirement pension plan specifies that only employees with at least one year of service are eligible for enrollment, For administrative convenience, contributions are paid on a scheduled regular contribution date, and employees are enrolled in the retirement pension plan based on whether they meet the one-year service requirement as of that date. Consequently, there are instances where employees are enrolled in the retirement pension plan only after their one-year service mark has passed. ● Inquiry 1: When an employee''s one-year service anniversary and the regular contribution date under the retirement pension plan are different, when must the initial DC contribution be made for that employee? ● Inquiry 2: If the contribution is paid on the regular contribution date after the employee’s one-year service mark has passed, does late interest accrue?
110.Inquiry 1: When converting from a DB plan to a DC plan retroactively to cover past service periods, how should the contributions be calculated? Inquiry 2: In the case where a DB plan member is on parental leave at the time of conversion to a DC plan, how should contributions be calculated for the period from September 1, 2019 to February 29, 2020, and should unused annual leave allowance be included in the wage base? Date of Hire Start of Parental Leave Date of DB→DC Conversion Date of Retirement 2017.1.1. 2019.3.1. 2019.9.1. 2020.2.29.
109.Under our company’s DC retirement pension rules, there is no provision explicitly stating that the definition of "average wage" is adopted in accordance with Article 2(1)(6) of the 「Labor Standards Act」. In this case, is the company still required to compare average wage and ordinary wage and apply the higher amount when calculating contributions? ※ It is difficult to interpret that the definition of average wage under Article 2(1)(6) of the 「Labor Standards Act」 applies without an express reference clause, such as the definition clause in Article 2(4) of the 「Guarantee of Workers’ Retirement Benefits Act」 ("average wage" refers to the average wage under Article 2(1)(6) of the Labor Standards Act), even if the DC plan rules—agreed to by employees—include "average wage" as part of the calculation method.
108.● How should contributions under a defined contribution (DC) retirement pension plan be calculated during a period of reduced working hours for childcare, particularly regarding the inclusion of overtime pay and holiday bonuses?
107.Inquiry 1 Can performance-based bonuses used in a DC plan be considered as bonuses? Inquiry 2 Is it possible for an employee who receives a performance-based bonus to receive part of it in cash like salary and contribute the remaining portion to the DC retirement pension plan? Inquiry 3 If the employee is already enrolled in a DC plan, is it necessary to additionally enroll in a separate DC plan for performance-based bonuses? Inquiry 4 Is it permissible for some employees to be subject only to the DC retirement pension plan and for others to additionally enroll in a performance-based bonus DC plan? Inquiry 5 Is it mandatory to contribute the same amount every year? If a contribution of 500,000 KRW was made this year as a performance-based bonus but no such bonus is earned next year due to poor performance, can the contribution be omitted? Inquiry 6 According to your retirement benefit system manual, it is understood that it is prohibited to differentiate based on position, length of service, or performance evaluations. However, other documents state that such differentiation is permissible if clearly stated in the retirement pension regulations. Which interpretation is correct? Inquiry 7 According to your retirement pension manual, it is stated that employees may make contributions themselves and that these contributions need not be recorded in the employment contract. In that case, if the employer pays the performance-based bonus and the employee voluntarily contributes part of it to the DC plan, is that allowed? If so, must all employees enroll in the performance-based bonus DC plan?
106.In the case of an employee who took parental leave from January to April 2021, returned to work in May 2021, and resigned on June 1, 2021, how should the 2021 defined contribution (DC) retirement pension contribution be calculated?
105. The business established a Defined Contribution (DC) retirement pension plan on April 16, 2010, setting the enrollment period from the date of establishment and contributing not 1/12 of the annual total wage, but 1/12 of a partial amount of wages. When the business closed in August 2016 due to the employer''s disappearance, the retirement pension provider paid a lump-sum retirement benefit to the enrolled employees in December 2016. When calculating unpaid retirement benefits and retirement benefits eligible for wage guarantee (subrogated payment), is it appropriate to calculate the total retirement benefit for the entire period of service and then deduct the amount paid by the retirement pension provider?
104.If a Defined Contribution (DC) retirement pension plan participant makes a mid-term withdrawal, and later a wage increase rate is finalized and the increased portion of wages is paid for that year—along with an intention to recalculate the retirement benefit for the period before the withdrawal and pay the difference—should the contributions for the period covered by the mid-term withdrawal be recalculated and paid into the account, or should the difference be paid directly to the participant?
103.If a company switches from a Defined Contribution (DC) plan to a Defined Benefit (DB) plan while maintaining the previous DC account—continuing to manage the accrued assets without further employer contributions, and making new contributions only to the DB plan—can the participant still make additional voluntary contributions to the existing DC account for tax deduction purposes?
102. In the case of an employee enrolled in a Defined Contribution (DC) retirement pension plan who worked for 1 year and 6 months before resigning, how should the retirement benefit be calculated? What is the reason for charging fees, and can these fees be refunded when receiving the retirement benefit?
101.Is it possible for an employee who resigns after less than one year of service and who has made additional contributions under a Defined Contribution (DC) retirement plan to transfer those contributions to an individual retirement account (IRA)? Also, if such an employee has made additional contributions, who retains ownership of the accumulated funds and who bears any investment losses?
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