The Executive Yuan yesterday approved a new draft of a pension system for retired workers, promising that the new policy would cover everyone.
The Council of Labor Affairs said that the proposal would replace the current system, under which only a quarter of the work force benefits.
"I'm so glad that all our employees will be protected by this system," Chen Chu (陳菊), chairwoman of the labor affairs council, said yesterday.
Chen said the council would send the draft plan to the legislature as soon as possible, and hoped it would be passed in the current session before the end of next month.
The most significant aspect of the new system is its "portability," which will enable employees to accumulate a pension regardless of job changes.
Under the current system, laborers under the age of 55 must have worked for the same company for at least 25 years, while those aged 55 or above must have done so for at least 15 years.
But, Chen said, the average Taiwanese small or medium-sized enterprise lasts around 13 years, while people change their jobs every eight years on average. "It is estimated that three-quarters of the 7.8 million-strong work force are not entitled to payments from the nation's Labor Pension Fund (勞退基金)," she said.
Another feature of the new system is its adoption of three different, controversial mechanisms as options for employees, on the recommendation of the Economic Development Advisory Conference (EDAC).
The first system is the "individual retirement account" system (IRA, 個人帳戶制), which means any pension contribution will be tied to the employee, instead of to employers. Employees will also be entitled to make payments into the system over and above their employers' regular contributions.
Under this system, employees will receive their pension in one lump sum immediately after retirement.
But Chen said the Cabinet couldn't follow the EDAC's recommendation that the pension payout be free of taxation.
"While negotiating with other departments, considering the balance of the national financial situation, the Executive Yuan decided against the suggestion," Chen said.
The second system, the "annuity insurance" system (附加年金制), would award claimants monthly payments after retirement. Contributions would be made only by employers at a minimum rate of 6 percent of the employee's salary after two years of the fund's operation. The scheme is to be introduced gradually with a rate of 2 percent in the first year and 4 percent in the second.
If after three years the fund hasn't balanced its books, employees will be required to make up the balance.
The third mechanism, called "other annuity insurance," refers to retirement programs provided by companies with more than 300 employees. Only with the agreement of both the management and the labor force can the system be adopted.
"This new system will not increase the government's financial liabilities, but it will protect employees after retirement," Chen said.
The draft plan also says the central government must form a committee to monitor operation of the system.
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