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Retirement Plans

Application for Substitute Payment

Application for Substitute Payment

Eligibility requirements

- A “substitute payment” is issued by the Minister of Employment and Labor, notwithstanding Article 469 of the Civil Act on the performance of third party obligations, to employees who lost their job following a bankruptcy ruling on their employer or its placement under rehabilitation proceedings and who filed a request to receive unpaid wages, retirement benefits or maternity leave before and after childbirth owed to them (Article 7(1) and subparagraph 3 of Article 2 of the Wage Claim Guarantee Act and Article 5 of the Enforcement Decree of the Wage Claim Guarantee Act).

- An application for substitute payment for overdue wages, etc., (hereinafter referred to as “substitute payment”) may be filed by an employee who worked for at least six months for a business covered by the Industrial Accident Compensation Insurance, within three years counting from one year prior to the date on which the business was declared bankrupt or placed under rehabilitation proceedings or filed for the status of insolvency in-fact (which is considered the date on which employment is terminated) (Source: Ministry of Employment and Labor ).

Q. When the employer can no longer be identified due to the insolvency of a business, how can an employee establish the fact that his or her employment with this business was terminated and can he or she still receive retirement benefits?

A. The termination of employment due to the insolvency of a business can be established by supplying the following documents, and the retirement benefits are paid in the manner described below:

Contents	Description
Evidence of the termination of employment	▪ Certificate of Discontinuation of Business (issued by the tax office) for the company. ▪ Documents attesting to the loss of eligibility for national insurance programs by the applicant for the subrogated payment (enrollee) (see the ineligibility code in the notice of loss of eligibility from the Employment Insurance, etc.) ▪ Documents providing evidence that the applicant (enrollee) now works for another business (evidence that eligibility for the Employment Insurance was restored or the certificate of employment, etc.) ▪ If the termination of employment cannot be established through the above-listed documents, the Minister of Employment and Labor requests an affidavit of termination of employment from the applicant and attempts to ascertain it by contacting the company, its personnel officer or other employees by phone.
Method of payment for retirement benefits under a defined benefit pension plan	▪ Payment of amounts corresponding to the rate of contribution, determined based on the information provided by the employer (minus any applicable tax withholdings) ▪ Notification of the employer about the details of the distribution made.
Method of payment for retirement benefits under a defined contribution plan	▪ Payment of contributions made to the employee’s retirement account (minus any applicable tax withholdings). ▪ The employee is notified if there are any unpaid contributions.

Applying for Substitute Payment

- An application for a substitute payment must be filed before the following deadlines (See Article 7(7) of the Wage Claim Guarantee Act, subparagraphs 1 through 3 of Article 9(1) of the Enforcement Decree of the Wage Claim Guarantee Act, and Article 5(1) and (2) of the Enforcement Rules of the Wage Claim Guarantee Act).

Contents		Application Deadline and Method
Insolvency Payment	Substitute payment provided in case where a ruling to commence rehabilitation proceedings is issued against the employer, where a ruling declaring bankruptcy is issued against the employer, or where the Minister of Employment and Labor acknowledges that the employer is unable to pay overdue wages, etc.	To be submitted to the Korea Worker’s Compensation & Welfare Service through the competent regional labor office within two years from the confirmation of the employer’s bankruptcy or insolvency
Simplified Substitute Payment	Substitute payment provided in case where a judgment, payment order, conciliation, or ruling has become final and conclusive	To be submitted to the Korea Worker’s Compensation & Welfare Service within a year from the date of the judgment, etc.
Simplified Substitute Payment	Substitute payment provided upon the issuance of the documents indicating overdue wages or delinquent employer by the Minister of Employment and Labor to the employee to confirm overdue wages, etc. to be made by the employer	To be submitted to the Korea Worker’s Compensation & Welfare Service within six months from the initially issued date of the documents indicating overdue wages or delinquent employer