Ruling party and government push to require external funding of severance benefits at workplaces with 100 or more employees starting in 2028

[Financial News] Starting in 2028, the ruling party and government will phase in mandatory external funding of retirement benefits, beginning with workplaces employing 100 or more people, while providing 12 billion won in financial support to small-scale workplaces. The measures are intended to reduce the risk of unpaid severance and improve returns on retirement pension investments. They are also pushing to pass amendments to the relevant law by the end of the year.
The Democratic Party of Korea and the Ministry of Employment and Labor held a ruling party-government meeting at the National Assembly on the 29th to discuss improvements to the retirement pension system and key legislative tasks, including the measures outlined above. Mandatory external funding of retirement benefits requires companies to set aside funds for those benefits with external financial institutions and others, reducing the risk of nonpayment due to worsening business conditions or bankruptcy. The government plans to divide trustee entities for fund-type retirement pensions into three categories and improve returns on existing contract-type retirement pensions. It is also considering tax support to encourage people to receive their pensions.
Minister of Employment and Labor Kim Young-hoon said, “We must develop retirement pensions worth more than 500 trillion won into a genuine system for guaranteeing retirement income,” adding, “I will consult with lawmakers to revise the Retirement Benefits Act and ensure it passes by the end of the year.” Democratic Party of Korea lawmaker Kim Jeong-ho, who chairs the National Assembly’s Climate, Energy, Environment and Labor Committee, also said, “After 20 years, labor, management and the government have reached agreement on phased implementation of the mandate and the promotion of fund-type retirement pensions,” stressing that “social consensus must lead to concrete improvements to the system and legislative outcomes.” He added that further coordination was needed on the detailed system design and implementation plans.
The meeting also discussed next year's government budget. The Ministry of Employment and Labor has set next year's budget at 38.9537 trillion won, up 3.4% from this year, and plans to focus funding on vocational training in artificial intelligence (AI), expanding work experience for young people, social insurance support for vulnerable groups, and preventing industrial accidents.

[email protected] Jiwon Song Reporter