File your retirement pension plan rules on Form No. 1 via the Labor Portal

Signing up for a defined contribution (DC) pension product at a bank does not by itself set up a retirement pension plan in Korea. Under the Employee Retirement Benefit Security Act (근로자퇴직급여 보장법), the employer must write retirement pension plan rules (퇴직연금규약) and file them with the Minister of Employment and Labor (Articles 13 and 19), and a missed filing can lead to an administrative fine. The pension provider (퇴직연금사업자: a bank, insurer or securities company) usually drafts the rules, but the company files them and runs the worker representative process. This guide for founders and HR staff covers the form, attachments, filing route and worker representative rules in order.

The form and its two attachments

Article 2(1) of the Enforcement Rule of the Act requires Form No. 1 (별지 제1호서식), the report on defined benefit (defined contribution, hybrid) retirement pension plan rules (확정급여형(확정기여형, 혼합형) 퇴직연금규약 신고서). It goes to the head of the regional employment and labor office (지방고용노동관서), the local branch of the Ministry of Employment and Labor, with two attachments:

• the retirement pension plan rules; and
• proof that you obtained the worker representative's consent or heard its opinion.

The worker representative (근로자대표) is the union that a majority of workers have joined or, if there is none, a majority of the workers (Act, Article 4(3)). In a company without a union, a consent form or opinion confirmation signed by a majority of all workers serves as proof.

The civil service guide on the Labor Portal (노동포털), the ministry's online filing site, describes the filing as follows.

What DC plan rules must contain

Article 19(1) of the Act lists what defined contribution plan rules must include. Even if you use the provider's draft as is, the company must check that none of these items is missing:

• who bears the contributions;
• how contributions are calculated and paid in;
• how the reserves are invested;
• investment methods for the reserves and information given to members;
• the default investment option (사전지정운용방법) system;
• early withdrawal of reserves;
• choice of pension provider, members and membership period;
• types of benefits and eligibility, investment status notices, the benefit payment procedure, and abolition or suspension of the plan.

The Act sets a minimum contribution. The employer must pay at least 1/12 of each member's total annual wages, in cash, regularly and at least once a year (Article 20(1) and (3)). If you miss the payment date set in the rules, late-payment interest runs from the next day. If a member leaves while contributions are unpaid, you must pay the contributions and the late-payment interest within 14 days from the leaving date (Article 20(5)).

Consent or opinion from the worker representative?

Whether the proof is a consent form or an opinion record depends on the situation. Split by provision:

For new businesses, Article 5 requires the employer to set up a defined benefit (DB) or DC plan within 1 year after the business is established, and words the procedure as "after hearing the opinion" of the worker representative. A company that already runs the severance pay system (퇴직금제도) and moves to DC is changing the type of plan, so it needs consent.

Report changes to the plan rules

If you change the content of filed plan rules, notify the head of the regional employment and labor office under Article 2(2) of the Enforcement Rule. Attach whichever of these applies:

• the plan rules, prepared to compare the content before and after the change;
• proof of the worker representative's consent, if the change is unfavorable to workers;
• proof that you heard the worker representative's opinion, if it is not.

Typical cases are changing the pension provider, adjusting the contribution cycle, or adding a default investment option. If you send only the new rules without a comparison, expect a request to supplement. The filing looks like a one-off, but each such change brings a new notice. Keep the first filed rules and the worker representative documents in one folder so the comparison is easy to build.

What happens if you do not set up a plan

Article 11 of the Act says that an employer that has not set up a retirement benefit plan or an individual retirement pension plan is deemed to have set up the severance pay system. So a new company that passes the 1-year mark does not escape its retirement benefit duty; it is handled under the severance pay system. If you do decide to run a pension plan, these duties follow:

You can outsource the training to the pension provider or a qualified specialist institution (Article 32(2)). Even then, the company should keep its own records that the training took place.

Related guides: filing changed work rules on Form No. 15 and mandatory workplace training.

Checklist

1. Choose a pension provider and get the terms of the investment management and asset management contracts.
2. Check the provider's draft rules against the items in Article 19(1).
3. Decide the worker representative procedure: set-up within 1 year of establishment, or a change of plan type.
4. Prepare a consent form or opinion confirmation signed by a majority of workers.
5. Log in to the Labor Portal with a business member account and submit Form No. 1.
6. Watch for a supplement request within the 7-day processing period.
7. Open an account for each member and align the first contribution date with the rules.
8. Schedule the yearly training.