Employer Action Code: Act
The Ministry of Labor (MoL) has amended the Enforcement Rules of the Labor Pension Act (LPA), opening new possibilities for employees who chose to remain covered by the old Labor Standards Act (LSA) when the new LPA was introduced in 2005. The amendments are a response to calls to allow LSA-covered employees to improve their retirement benefit accruals by also participating in the pension fund under the LPA, which has produced significant returns to participants’ savings in recent years.
Key details
Employees covered by the LSA now have the following new options:
- Voluntary contributions to LPA pension fund: Employees may request that their employer deducts up to 6% of their monthly covered earnings (150,000 New Taiwan dollars in 2026) for LPA contributions. Following a notification from the employer, the MoL will open an Individual Pension Account (IPA) to receive the contributions. Note: Employers are not required to contribute to voluntary IPAs (whereas a mandatory minimum employer contribution of 6% applies to employees mandatorily covered by the LPA)
- Agreed early settlement and transfer of LSA benefits: Employees who are voluntarily contributing to the LPA pension fund, and who have reached eligibility for LSA benefits, may mutually agree with their employer to settle their LSA benefit before actual retirement. In this case, the full LSA benefit is transferred to the employee’s IPA. To be eligible, employees must have reached age 55 with at least 15 years of covered service or have at least 25 years of service. If the employee has not yet reached the maximum LSA benefit at the time of the early settlement and the transfer, the employer will remain liable for LSA benefits for subsequent years of service until retirement or reaching the maximum benefit. The LSA benefit for continued service may also be settled and transferred to the employees’ IPA on annual basis
Employer implications
Employers with LSA-covered employees should align their retirement benefit policies with the amended LPA enforcement rules. The amendments offer greater flexibility for eligible employees, as well as the possibility to increase their retirement benefits. The MoL estimates that the changes could affect just over 100,000 employees nationwide (of a total workforce of around 12 million). Although the share of staff that remain covered by the LSA is relatively low, they have accrued substantial entitlements due to long service. Among companies surveyed by WTW, 72% provide benefits under the LSA for 10% of their employees (at the median). As LSA liabilities are subject to annual employer contributions to pre-fund the liabilities, early settlements should not result in additional costs to the employer and may help to reduce future financial risk related to the LSA liabilities. For companies with foreign professionals on staff, it is worth noting that until recently, i.e., December 31, 2025, those employees were only covered by the LSA unless they were permanent residents or had a Taiwanese spouse (see Global News Brief).
