Two Laws Associated with Corporate Pensions Passed

In June, the government passed the Defined Contribution (DC) Pension Law and the Defined Benefits (DB) Corporate Pension Law. Under the DC Pension Law, benefits paid will depend on the performance of the pension management fund selected by the contributor. This pension plan is based on the American 401(k) pension plan and is thus ordinarily referred to as the Japanese 401(k).

Businesses welcome the DC Pension Law because it allows employees to take their pension plans with them as they switch jobs, and allows people working for SMEs (Small and Medium-sized Enterprises) to join pension plans. Labor opposes the law because it leaves the responsibility and risk of corporate pension management in the hands of individuals who are usually unqualified to make pension decisions.