A new bill designed to strengthen employee pensions was issued in Japan on August 10, 2011. Under the new law, which comes into effect on January 1, 2012, employees enrolled in DC plans are now permitted to make matching contributions.
Japanese employees enrolled in DC plans are now allowed to add their own contribution on top of the employer’s contribution. (Enrolee contributions alone are not permitted.)

The amount of the enrolee’s contribution is restricted, and must meet two conditions:
- Enrolee’s contribution + employer’s contribution ≦ maximum contribution amount*
- Enrolee’s contribution ≦ employer’s contribution

Contributions must also meet conditions set out in the plan rules, which are subject to labour-management agreement. Examples of such rules are:

- Enrolees may decide themselves freely how much to contribute within the above restriction.
- The contribution amount must be the same as the employer’s contribution

* If enrolled in no other corporate pension plans: JPY 51,000 per month; If enrolled in other corporate pension plans: JPY 25,500 per month

The advantages and notices of matching contributions
For enrolees, the advantages of making matching contributions over purchasing financial products privately are that they enjoy tax deductions on premiums and tax-exemption on investment profits. However, it is not possible to withdraw the funds before age 60.

For employers, participating enrolees would gain a deeper appreciation of the DC plan. In addition to that the presence of the plan should grow higher. However, employers would have to make adjustments to the salary payment system in order to check the contribution limit and manage enrolee contributions.

Action needed by employers
If matching contributions are not adopted, no action is necessary on plan rules in principle.

If employers decide to adopt matching contributions, they must apply to the Bureau of Health and Welfare on changing the plan rules after the labour-management agreement has been signed. Applications should be made three months prior to the implementation date (for January 1, 2012, applications were needed by the end of October 2011). Administrative changes such as calculations of each enrolee’s contribution, adjusted forms and computer data must also be scheduled.

Final details of the new system will be revealed following the publication of governmental and ministerial ordinances. Many employers are expected to take steps to change their plan rules in line with the implementation of the law, and Swiss Life Network Partner Meiji Yasuda Life is available to provide assistance and advice on this.

Meiji Yasuda Life Insurance Company

As the number one group life insurance provider in Japan, Meiji Yasuda Life has been a member of the Swiss Life Network since 1980. The company offers individual life and annuities, group life and pensions, and investment products, along with medical, accident, and disaster coverage.

For more information
please visit www.meijiyasuda.co.jp
or contact Mr. Takeshi Misawa
E-mail: ta-misawa@meijiyasuda.co.jp
Phone: +81 3 3283 9226