Premier Sean Chen (陳冲) yesterday reassured those people worried about shrinking pension funds — due to the rapid accumulation of hidden debts from the Labor Insurance Fund — that “the government is duty-bound to find solutions.”
However, Chen still reserved judgement on whether a possible solution would be for the government to use public funds to honor the benefits people accrue from the pension scheme if the fund does go bankrupt.
Chen said that a discussion on whether the government should take on pension liabilities should be delayed until the inherent problems associated with the system are properly addressed to make the pension scheme viable.
He added that the inclusion of an article in the Labor Insurance Act (勞工保險條例) stating that pension liabilities lie with the government, as suggested by lawmakers, could make the administrator of any pension fund less cautious about risk management.
Chen made the comments in response to media queries about the issue, which has attracted much public attention since the Council of Labor Affairs (CLA) on Tuesday released an actuarial report on the fund.
In operation since 1950, the Labor Insurance Fund, the first social insurance system in the country, which now provides coverage to more than 9 million people, is worth approximately NT$520 billion (US$17.79 billion); yet, according to the CLA report, it has hidden debts which have an accumulated value of more than NT$7.3 trillion.
If the situation continues, the CLA predicted that by 2018, the fund’s payments will exceed its revenues while the fund itself would go bankrupt by 2027, meaning that those aged under 50 this year — about 7.5 million people — would be left with a bankrupt fund by the time they apply for their pension payments.
Several lawmakers across party lines have demanded that clauses, under which the government allocates funds to address hidden debts and guarantees pension benefits, be introduced into the Labor Insurance Act, in the same way guarantees exist for the pension schemes of the military, civil servants and teachers.
However, the proposal has yet to receive a positive response from the Cabinet.
At the legislature’s question-and-answer session on Friday, Chen proposed a three-month timeframe for the Cabinet to draw up solutions to the fund’s structural problems, which he said were “decade-long problems.”
CLA Minister Pan Shih-wei (潘世偉) outlined three ways to address the problems: To change the premium rate structure, to employ a lower income-replacement rate and to revise the rules on eligibility for the pension scheme, including minimum years of work and age.
Chen and Pan both argued that the 2008 revision to the pension system — which allowed insured parties to receive their pension in monthly installments for the duration of their retired life, rather than in one lump sum as the previous system had operated — without making reasonable adjustments to rate structures, income-replacement rate and eligibilities for accessing pension payments was the leading cause of the financial distress within the fund.