One in five public institutions that have adopted defined benefit (DB) retirement pensions has failed to meet the legal minimum reserve requirement of 100%.
According to data received by Kim Wi-sang, a member of the National Assembly's Climate, Energy, Environment, and Labor Committee from the Ministry of Employment and Labor, as of August this year, a total of 214 public institutions had implemented DB retirement pensions. Among these, 21.5%, or 46 institutions, fell short of the minimum reserve rate.
The public institution with the lowest reserve rate was the Taekwondo Promotion Foundation, which had a reserve of 1.45 billion won, resulting in a reserve rate of only 39.17%.
Seoul National University Bundang Hospital had a reserve rate of 43.61%, while the Korea Transportation Safety Authority and the Korea Road Traffic Authority had rates of 46.35% and 49.57%, respectively. These four public institutions did not even reach half of the legal standard of 50%.
Other institutions with inadequate reserve rates include the War Memorial Foundation, the Small and Medium Business Administration, the Korea Construction Equipment Safety Management Foundation, the Korea Land Information Corporation, the Korea Veterans Welfare Medical Corporation, and the Korea Rural Community Corporation.
Under the Worker Retirement Benefits Security Act, if the DB reserve rate falls below 95%, employers are obligated to make up at least one-third of the shortfall by the next fiscal year. Failure to address this without justifiable reason can result in fines of up to 10 million won.
Kim Wi-sang stated, "It is a serious financial insensitivity for public institutions, funded by taxpayer money, not to meet the legal standards for workers' retirement benefits. This should not be attributed merely to budget shortages; a systematic reserve plan must be established promptly."
Meanwhile, retirement pensions are a system that accumulates and manages funds for workers' retirement benefits, which can be received as a pension or lump sum. This system was introduced to supplement the existing lump-sum payment system, which can leave workers without retirement benefits if a company goes bankrupt. Types of retirement pensions include defined benefit (DB), defined contribution (DC), and individual retirement pensions (IRP). In a DB plan, the company manages the funds to pay retirement benefits, while in a DC plan, employees manage the funds themselves. An IRP is a personalized account where employees can store retirement benefits received upon job change or retirement and make additional contributions.
* This article has been translated by AI.
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