Duties and Responsibilities of an Employer
Duties and responsibilities related to the operation of the retirement plan
- An employer must comply with all relevant laws and statutes and the retirement plan rules or the standard contracts for the SME retirement pension fund, and fully perform the following duties to ensure the stable operation of the retirement plan (Article 32(1) of the Act on the Guarantee of Employees’ Retirement Benefits and Article 31 of the Enforcement Decree thereof):
· An employer must select a retirement pension trustee in comprehensive consideration of the capability and the expertise in the overall aspects of retirement pension plans, such as operational management services, asset management services and the relevant services.
※ When reporting the retirement plan rules to the Minister of Employment and Labor or if the plan trustee has been newly selected or a change thereof has occurred, an employer with 300 or more employees must file an explanation.
· The employer shall provide the Korea Workers’ Compensation & Welfare Service or the retirement plan trustee (referring to the lead institution, in the case of signing a contract on operational management with multiple trustees pursuant to Article 4(6) of the Enforcement Decree of the Act on Guarantee of Employees’ Retirement Benefits) with all documents that are required for calculating employer contributions and ascertaining its ability to pay wages under Article 16 of the Act on Guarantee of Employees' Retirement Benefits, such as the collective agreement, rules of employment, employment contracts and salary statement.
· In the case where the trustee of the retirement plan or the professional agency is placed in charge of educating enrollees, the employer must provide all necessary assistance so that group education can be conducted.
· When selecting or changing the lead institution, the employer shall notify it to the retirement plan trustee that performs operational management, within 7 days from the date of selection or change.
Duty of educating employees about the retirement plan
- An employer that offers a defined benefit plan or a defined contribution plan must inform employees about the status of operation of the plan at least once a year and must also educate them about the following (Article 32(2) of the Act on the Guarantee of Employees’ Retirement Benefits and Article 32(1) of the Enforcement Decree thereof):
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Category
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Education
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General information
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▪ Types of benefits, eligibility requirements for each type of benefit and the amounts thereof, and other differences between the various retirement plans. ▪ Matters on borrowing against the retirement account, early withdrawal therefrom and delay charge. ▪ Components of an employee’s salary on which the calculation of benefits or contributions is based. ▪ Procedure for the payment of retirement benefits and rules on transferring them to an individual retirement account or a copayment account for the SME retirement pension fund plan ▪ Information about the taxation of retirement benefits including pension income tax and retirement income tax. ▪ Measures taken to protect the retirement of employees when an employer discontinues or terminates the retirement plan. ▪ General guidance on the management of assets and liabilities based on the levels of income, asset and debt, age and the continuous years of services; and the importance of preparing for later life.
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Defined benefit pension plan
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▪ Payment status of contributions to the retirement account for the three most recent years. ▪ Standard amount of each type of wages. ▪ The current status of reserves, compared with the minimum reserves as at the end of the preceding business year. ▪ If a financial stabilization plan is in place, its details and the status of compliance. ▪ Matters concerning the current status of operation, operation object, etc.
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Defined contribution pension plan
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▪ The amount of employer contributions, payment date and the current status of payment. ▪ If a defined contribution pension plan is jointly offered by two or more employers, information about the standard rule and standard agreement. ▪ Information about diversified investment and other investment rules to ensure the stable management of retirement plan contributions. ▪ Information about revenue structure by operation type of reserves such as collective investment securities; base selling price; investment risk; fees; and etc. presented by a retirement pension trustee.
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Measures to prevent defined benefit pension plan allowances from being decreased
- Where a circumstance falls under any of the followings, an employer who established a defined benefit plan shall inform in advance employees of the fact that retirement benefits may be decreased and take measures necessary to prevent the retirement allowances from being decreased, such as modification into a defined contribution plan or an SME retirement pension fund plan, improvement of standards for calculation of retirement benefits, etc. (Article 32(5) of the Guarantee of Employees’ Retirement Benefits Act.
· Where an employer intends to execute a system to adjust the wages of employees based on certain age, point of continuous services or the amount of wages through collective agreements, employment rules, and etc.
· Where employees continue to work shorter contractual work hours for at least three months as their employer shortens the contractual work hours by at least one (1) hour a day or five (5) hours a week under the agreement with its employees.
· Where the wages of employees are decreased by the shortened working hours;
· Other cases where wages are reduced as prescribed by the Enforcement Regulation of the Act on the Guarantee of Workers’ Retirement Benefits.
- An employer who fails to inform employees of the fact that the retirement allowances may be decreased or take measures necessary to prevent the decrease of retirement allowances shall be punished by a fine not exceeding KRW 5 million
Prohibited Conduct for Employers
Prohibited conduct for employers
- An employer offering an employee retirement plan shall not engage in any of the following activities (Article 32(4) of the Act on the Guarantee of Workers’ Retirement Benefits, and Article 33 of Enforcement Decree thereof):
· Entering into an agreement for operational management services and asset management services for a private gain or the gain of a third party.
· Deliberately omitting the following information (including failing to provide information) necessary to perform operational management services or asset management services, or providing false information to the retirement plan trustee;
√ Necessary materials such as collective agreements, employment rules, employment contract, wage slip, and etc. to calculate employer contributions and confirm the abilities to pay wages pursuant to Article 16 of the Act on Guarantee of Workers' Retirement Benefits
√ Other information necessary to perform operational management and asset management such as salary payment
· Demanding or receiving services other than value-added services specified in the service agreements, etc. that are of economic value, from the retirement plan trustee;
· Asking the retirement plan trustee to purchase goods or selling goods to him/her on the ground for having concluded a contract;
· Demanding the retirement plan trustee to present a definite amount of returns on a management method that does not present fixed returns, or receiving such proceeds from the trustee; or
· Failing to prepare or notify a financial stabilization plan.
Penalties for noncompliance
- An employer who entered into operational management service and asset management service agreements for a retirement plan with a financial institution for private gain or the gain of a third party may face a prison term of up to two years or a fine of up to KRW 20 million (Subparagraph 4 of Article 45 of the Act on the Guarantee of Workers’ Retirement Benefits).
- Willfully omitting certain information necessary for operational management and asset management services by the retirement plan trustee or providing materially false information may result in a fine of up to KRW 5 million (Subparagraph 2 of Article 28(2) of the Act on the Guarantee of Workers’ Retirement Benefits).