South Korea: Mandatory externally funded retirement plans for all employers

Employer action code: Act

The government has announced its Plan to Strengthen the Function of Retirement Pensions (see official government announcement), including a phased timetable requiring all employers to provide externally funded defined benefit (DB) or defined contribution (DC) retirement plans under the Employee Retirement Benefit Security Act (ERBSA). The government plans to submit the ERBSA amendment bill in November and aims for passage by the end of 2026, followed by a one-year preparation period in 2027.

Background

The ERBSA was enacted primarily to secure workers’ retirement income through external funding of retirement benefits. Since the introduction of funded ERBSA DC and DB plans in 2005, many employers have replaced unfunded Severance Pay Scheme (SPS) arrangements with these funded plans. Adoption is particularly high among large employers, with over 90% of companies with 300 or more employees having adopted these plans; however, adoption among smaller employers remains low (23% of workplaces with fewer than 30 employees). This is despite the legal requirement that all companies established after July 2012 have funded plans as well as multiple policy and regulatory measures intended to discourage use of unfunded SPSs (see Global News Brief: Severance Pay Scheme to be replaced by ERBSA mandatory funded retirement plans).

Key details of the announcement

Phased mandatory adoption

• The mandate for companies to provide funded ERBSA plans would apply depending on company size:
  • From January 2028 for companies with 100 or more employees
  • From January 2029 for companies with 10–99 employees
  • From January 2030 for companies with fewer than 10 employees
• The funding requirement would apply only to service accrued from each phase's effective date

Compliance and funding

• Under the ERBSA arrangement, companies may adopt a DB plan, a DC plan or both
• DB plans must meet the statutory minimum funding ratio, and regular inspections of underfunded plans would be expanded
• For DC plans, a system would be built to identify unpaid employer contributions, including a new requirement for employers to provide wage information
• After the mandate takes effect, workplaces without a plan would be automatically enrolled in the SME Retirement Pension Fund (Purun Ssiat, "Blue Seed"), with an option to opt out within a set period. Eligibility for the fund would expand to workplaces with up to 300 employees from January 2028
• Financial support would be available for small employers that adopt a plan early, and pension-rule filing requirements would be simplified

Fund-type (trust-based) retirement pensions

• Fund-type (trust-based) arrangements would be introduced for DC plans and IRPs alongside existing contract-type arrangements. A licensed trustee entity, subject to strict fiduciary duties and responsibilities, would pool and manage members' assets. Employers could offer more than one arrangement and, with employee representative consent, set a fund-type plan as the default

Employer implications

According to the 2026 WTW Global Benefits Attitudes Survey, retirement benefits are an important and highly valued employee benefit. All companies that currently offer an SPS would be required to adopt an ERBSA plan in accordance with the phased timeline. Among companies surveyed by WTW, 42% have yet to establish an ERBSA plan. Companies will need to take action to review their current program and develop an implementation plan as follows:

• SPS employers: Plan on the process to implement an ERBSA plan to take around six months, as it requires gaining the consent of the employees (majority of employee consents at 50%+1)
• ERBSA DB employers: Review funding adequacy and the evolving governance requirements, including Asset-Liability Management/Investment Policy Statement and pension committee requirements as applicable
• ERBSA DC employers: Understand the changes to default options and monitor developments around fund-type (trust-based) arrangements. Employers should also consider how effectively members are managing their retirement savings and what support can be provided to improve member decision-making. Employers may also wish to assess whether a fund-type (trust-based) arrangement, once available, would suit their workforce

For further detail on these considerations, please download our flyer below.