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40,000 Firms in Pension Pullout Check
Asahi Shimbun
September 27, 2004
The agency launched a nationwide probe of suspected cases of illegal corporate withdrawals from the employees' pension program.
The agency's 312 social insurance offices on Friday were ordered to review an estimated 40,000 cases of corporate withdrawals this year to see if employers had valid reasons.
All corporations and, in general, private businesses with five or more employees, are obliged to join the employees' pension program.
But an increasing number of companies are suspected of bailing out of the program illegally to avoid premium payments, pretending they had closed or suspended their operations.
Agency suspicion was aroused after it learned in September that one of its offices in Shinjuku, Tokyo, was handing out a sample document that may have made it easier for businesses to file for undue withdrawals.
It raised concern that there could be more businesses being allowed to evade premium payments to a dwindling national pension fund, leaving workers out in the cold.
Last November, the agency tightened criteria for screening withdrawal applications.
Pension premiums are currently 13.58 percent of an employee's annual wage and will be raised incrementally to 18.3 percent by 2017. Under the program, they are split 50/50 by employee and employer.
Even if firms quit the pension program by faking their closure, they have no problem continuing in business.
But their employees must then switch to the national pension program, which means reduced retirement benefits.
If they are not informed that their employers withdrew from the plan and do not switch, they could end up ineligible for pension benefits.
The agency's review requires social insurance offices to re-examine withdrawal papers.
If there are questionable points, staff will inquire by phone or letter. Officials may also visit the companies in person.
The agency is cracking down on businesses not paying required premiums. It fears that a payment rise slated for next month could tempt even more companies to shun premiums.
Of the new businesses opened in fiscal 2002, nearly 20 percent of those obliged to join the pension program have not. Then there are those companies opting out of the program.
Even after criteria was tightened, companies were still allowed to submit a makeshift record of the board of directors' intention to close shop, in place of an official register of corporate closure.
It is believed to have helped some companies that used the sample document from the Shinjuku social insurance office to sidestep the program.
Businesses filing for withdrawal were allowed to use the sample as a template to draft the board-meeting record.
That is exactly what 62 companies did out of 157 that filed the application at the Shinjuku office between January and August. Of them, 48 companies had premium payments in arrears, officials said.
The agency has ordered the office to stop using the sample.
An executive at one of the 48 companies said a Shinjuku office employee suggested the company quit the pension program or the office might have to seize its assets for back payments.
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