I. Comparison of Taiwan's Labor Retirement Systems: New and Old Systems
|
Item |
New System |
Old System |
|
Legal Basis and System Type |
Based on the "Labor Pension Act," uses a defined contribution plan. |
Based on the "Labor Standards Act," uses a defined benefit plan. |
|
Implementation Period |
July 1, 2005 to present |
November 1, 1986 to June 30, 2005 |
|
Responsible Authority |
Bureau of Labor Insurance |
Bank of Taiwan (formerly Central Trust of China) |
|
Eligibility for Pension |
Can choose monthly pension or lump-sum payment; eligible for monthly pension upon reaching 60 years old with 15 years or more of service. |
Laborer-initiated retirement or employer-mandated retirement; must meet specific age or service requirements (e.g., 55 years old with 15 years or more of service). |
|
Calculation of Seniority |
Seniority is calculated across different employers (portable). |
Seniority must be calculated within the same employing entity. |
|
Contribution Rate |
Employer contributes at least 6% of monthly salary; employee can voluntarily contribute 1% to 6%. |
2% to 15% of total monthly salary. |
|
Benefit Standard |
Calculated based on contribution amount and investment returns. |
Average monthly salary multiplied by the number of base units; 2 base units for each of the first 15 years, and 1 base unit for each year exceeding 15 years, up to a maximum of 45 base units. |
|
Method of Receiving Payment |
Can choose to receive monthly or in a lump sum. |
Generally received in a lump sum. |
|
Ownership of Pension Account |
Belongs to the employee (individual pension account). |
Belongs to the employer. |
|
Applicable |
Applies to all workers within the scope of the Labor Standards Act, excluding self-employed individuals such as small stall owners and taxi drivers, as well as civil servants, military personnel, etc. |
Only applies to old system workers and foreign employees who have not switched to the new system. |
II. Procedures for Establishing Taiwan's Old Labor Retirement System
l To protect workers' retirement pension rights, employers are required to comply with Article 56, Paragraph 1 of the Labor Standards Act by allocating 2% to 15% of the total monthly salary of workers under the old system into a dedicated retirement reserve fund account. Additionally, according to Paragraph 2 of the same article, employers must estimate the required retirement funds for employees eligible for retirement in the upcoming year before the end of each fiscal year. If there is a shortfall, it must be supplemented within the prescribed timeframe to ensure sufficient funds for future retirement pensions.
The labor retirement reserve fund allocated by employers must be supervised by a "Labor Retirement Reserve Fund Supervisory Committee," which is jointly organized by both workers and employers.
Procedures and Required Documents for Establishing the "Labor Retirement Reserve Fund Supervisory Committee" (Example: Taipei City)
Required Documents:
1. Application letter for establishing the Labor Retirement Reserve Fund Supervisory Committee.
2. Application form for committee establishment and contribution rate.
3. Complete list of all employees.
4. Tax withholding statement for the most recent month’s salary income (if no withholding tax applies, attach a wage roster).
5. Organizational regulations of the committee.
6. Roster of committee members and staff.
7. Seal card.
8. Copy of the company registration amendment form or legal entity registration certificate.
9. Registration application form for withholding unit (three copies of the unified allocation notification form with seals from the committee, employer, and chairman).
10. Copies of identification documents for the chairman of the supervisory committee and the withholding agent.
11. Meeting minutes of the Labor Retirement Reserve Fund Supervisory Committee.
l Application Methods: Applications can be submitted in person or entrusted to an agent.
III. Claiming Retirement Benefits under Taiwan's Old Labor Retirement System
1. Application Requirements:
Workers must meet one of the following conditions to apply for retirement benefits under the old system:
• Have worked for 15 years and reached 55 years of age.
• Have worked for 25 years.
• Have worked for 10 years and reached 60 years of age.
2. Application Procedures:
Once workers meet retirement eligibility, they must apply for retirement benefits through their employer. The specific steps are as follows:
• Step 1: Fill out an application form. Workers need to complete a "Labor Retirement Pension Application Form" along with relevant payment receipts.
• Step 2: Submit application documents. Submit the completed application form and other necessary documents (e.g., proof of identity, proof of employment duration) to the employer.
• Step 3: Employer review. The employer will review the application upon receipt to verify the worker's employment duration and eligibility conditions.
• Step 4: Pension payment. Once the employer confirms that the application is valid, they will calculate the pension based on the worker's years of service and average salary, then pay it out.
3. Claim Period:
According to regulations, claims for old system retirement benefits must be made within five years. If a worker has met retirement conditions upon resignation but has not received their pension from their employer, they should apply promptly to avoid losing their claim rights due to expiration.
4. Important Notes:
Workers should ensure that all documents are complete and accurate when applying for retirement benefits to avoid delays caused by incomplete information.
If a worker resigns before reaching retirement age, they should confirm whether their service years under the old system have been settled; otherwise, they may need to retain their service years until they meet eligibility criteria before claiming benefits.
5. The transfer of old system labor pension to the new system individual account
According to Article 12 of the Enforcement Rules of the Labor Pension Act, workers may transfer their old system pension settlement amount to their personal retirement account at the Labor Insurance Bureau. However, once transferred, the settlement amount cannot be withdrawn until the worker meets the eligibility requirements for retirement benefits (age 60 or loss of work ability).
Since the settlement amount is considered retirement income, it must be subject to the provisions on retirement income taxation under the Income Tax Act. However, if the full amount is transferred to the personal account, tax deferral benefits can be enjoyed, and taxes will be assessed when the amount is withdrawn, either in a lump sum or in installments. If the full amount is not transferred to the personal account, the settlement amount will still be subject to full taxation according to the relevant regulations.
