Enterprise Pension Will Be Applied to the Employees from Next Year

The government decided to legislate an enterprise pension system through generation shifts by applying the pension system to the employees who are hired from a certain point and maintaining the retirement allowance system.

The government expressed its position to implement the new system from year 2003 but decided to respect the decision of the Tripartite Commission on the date of implementation.

The Ministry of Labor submitted the outcome of `the research for the improvement of retirement allowance system` by Korea Labor Institute to the subcommittee of Economy and Society of the Tripartite Commission.

The research indicated that transference through generation shifts would guarantee the privileges of the laborers and minimize the cost in the shifting process of the system.

The research also recommended the government to revise the corporation tax law and the income tax law to annul the tax deduction for the business deposit (tax deducted up to 40 percent) and the retirement allowance (tax deducted up to 50 percent) and clarify the replacement of the retirement allowance system with the business pension system in the labor law. Particularly, a defined benefit plan (DB), which is similar to the retirement allowance system to guarantee the final benefits, was recommended by the research. DB is a system that the employers pay a certain amount promised in advance and the employers cover the loss caused by the payment, if any.

However, it is expected to take some more time to reach a final decision since the Ministry of Finance and Economy insists on the business pension system that the loss is covered by the employees, the Ministry of Health and Welfare argues for the connection of the enterprise pension system with the national pension for the welfare of the laborers after their retirement, and the labor circle refuses the early implementation of the new system.

Jin Lee leej@donga.com