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Retirement benefitscheme and retirement pension plan
Date: October 7,2019
I. Introduction
This is to provide a picture of Retirementbenefit scheme and retirement pension plan
II. Overview
(1). Retirement benefit scheme includes aDefined Benefit plan, a Defined Contribution plan, and a retirement allowancesystem
1. Scope of application: This Act shall applyto all businesses or workplaces employing workers: Provided that this shall notapply to businesses employing only relatives cohabiting with their employer
2. Establishment, etc. of Retirement AllowanceSystems: Any employer who intends to setup a retirement allowance system shall establish a system that makes itpossible to pay a retiring worker a prorated amount equivalent to average wagesearned for 30 days for each year of his/her continuous service.
3. Payment of Retirement Allowances: Where anyworker retires from his/her office, the employer shall pay such worker aretirement allowance within 14 days from the date when a ground for the paymentoccurs: Provided, that the payment date may be delayed under an agreement bythe parties concerned in extraordinary circumstances.
(2) Retirement Pension plans
|
Defined Benefit |
Defined Contribution |
IRP |
operator |
employer |
participants |
In case of unemployment or retirement, an employee deposit lump sum retirement allowance into IRP account for life after retirement |
The amount of contributions |
An employer shall reserve 90% of the estimated amount of retirement benefits at the end of every business year |
The amount of contributions shall be an amount equal to 1/12 of the total annual wages of the participant, for delinquent contributions, he/she shall be liable to pay interest for arrears |
Individuals shall pay the contributions under the individual retirement plan at his/her own expense |
Early withdrawal |
Not possible |
All the benefits are possible when a ground prescribed by laws occurs |
Possible when a ground prescribed by laws occurs |
Securing a loan |
Up to 50% when a ground prescribed by laws occurs |
Up to 50% when a ground prescribed by laws occurs |
Up to 50% when a ground prescribed by laws occurs |
Payment record submission |
obligated |
Not obligated |
Not obligated |
remarks |
The amount of retirement benefits is determined in the same way with the existing retirement benefit scheme |
Bookkeeping is needed upon payment (retirement allowance/ ordinary deposit) Similar to interim settlement |
In case of reserving lump sum retirement allowance into IRP account, tax deferral benefits are provided
|
1. Grounds for early withdrawal and securedloan: housing purchase, need for caring for the participants or dependents ofthe participants more than 6months, security money for lease of homeless people(only once for one's period of service in a position), force majeure
2. By2012, tax deferral benefits were offered in case of transferring more than 80%of lump sum retirement allowance within 60 days from the last day of work.However, from 2013, a retiree shall 100% of lump sum retirement allowancewithin 60 days from the last day of work for tax deferral benefits.
(3) Whena business operator newly established Defined Benefit Pension Plan pays theretirement allowance derived from the years before joining the plan the methodsof payment differ by rules and regulations of the business operator
1. Where the rules and regulations are set tomake a retroactive payment of retirement allowance for the period of joiningpoint to the Defined Contribution plan (hereinafter referred to as DC plan): paythe contributions equivalent to 1/12 of the annual wages at the joining pointto the DC plan.
2. Where the rules and regulations are not setto make a retroactive payment of retirement allowance for the period of joiningpoint to the DC plan: The retirement allowance for the service period beforethe joining point shall be paid by calculating the average salary for the lastthree months from the last day of service.
III. Case Study
Case study for calculating withholding tax derivedfrom DC plan and additional retirement allowance in the same year
<Situation>
An employee who worked for a company whichestablished DC plan retired on August31, 2019. His company paid thecontributions to the DC plan from his joining date to the end of 2018 butdirectly paid the retirement allowance for the period from Jan 1st2019 to Aug 31st 2019.
1. Where the employer established DC plan andoffers additional retirement allowance to the retiree the person withwithholding tax liability for retirement income is the employer.
2. Where the employer makes a payment forretirement allowance ahead of the DC pension trustee (financial institution)the employee shall submit PAYE situation a written notice for additionalretirement allowance within the 10 days of following month from the payment andgive an immediate notice of Retirement Income tax withholding receipts to theDC pension trustee (financial institution)
4. Where the DC pension trustee (financialinstitution) makes a payment ahead of the employer the trustee shall give anotice to the employer who shall aggregate the lump sum retirement allowanceand calculate retirement income tax.
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