The Ministry of Labor issued the Lao-Dong-Fu-Three-1060136338 Circular on December 1, 2017 (hereinafter, the “Circular”) to interpret how to pay a labor pension out of a labor pension reserve when there is no worker of a business organization to whom the pension system under the Labor Standards Act applies to serve as the deputy chairperson of the supervisory committee of the workers’ retirement reserve fund of such business organization.
This Circular first points out that the Labor Standards Act requires an employer to set aside a labor pension reserve in preparation for labor pension payment. Therefore, Article 56, Paragraph 1 of the Labor Standards Act provides that an employer shall contribute 2% to 15% of the total monthly wages of the workers to a labor pension reserve each month, which is deposited in a dedicated account. To ensure that a business organization utilizes a dedicated labor pension reserve account to pay labor pensions, Article 4 of the Regulations for the Allocation and Management of the Workers’ Retirement Reserve Funds and Article 6 of the Rules Governing Organization of Supervisory Committee of Business Entities’ Labor Retirement Reserve provide that when a labor pension reserve fund is utilized, verification by the supervisory committee of the labor pension reserve fund shall be conducted before the signatures of the employer and the chairperson of the committee, who is the employer’s representative, and the deputy chairperson of the committee, who is the representative of the workers, are affixed.
However, since the number of workers to whom the pension system under the Labor Standards Act (the old labor pension system) applies is declining after the effective date of the Labor Pension Act, if a business entity is still in operation while there is indeed no worker subject to the old pension system to serve as the deputy chairperson of the supervisory committee, it will not be possible to sign any utilization of the above pension reserve fund pursuant to the above requirements. To safeguard the rights and interests of workers, this Circular further explains that under such circumstances, the local competent authority may ex officio investigate to ascertain the purpose of utilizing a labor pension reserve fund by a business entity is indeed to pay labor pensions before the employer may sign the utilization (by affixing the seals of the company and its representative) of the labor pension reserve fund to pay labor pensions.