Research Report
A Legislative Study on Public Pension Reform by Integration of Funds - Focused on the Case of the National Pension and the Government Employees Pension -
Ⅰ. Backgrounds and Purposes
▶ Due to rapid changes in the demographic structure, structural reorganization of the public pension system is necessary.
○ Rapid changes in the demographic structure raise questions about the sustainability of public pension system.
○ Among the issues of public pension reform, the integration of the National Pension Scheme(NPS) and other specific occupations pension Schemes is also important.
- In particular, it is more necessary for the Government Employees Pension Scheme(GEPS) to be reformed in that the fund finances are already depleted and the state's fund support must continue to increase on a larger scale.
▶ In this situation, it is necessary to present convincing argument for the necessity of integrating the NPS and the GEPS.
○ The purpose of this study is to present the logical basis on the necessity of pension integration at the legal principle level beyond simply pointing out risks of fund depletion or presenting numerical problems such as the size of the deficit.
Ⅱ. Major Content
▶ The Two-Tier System of Public Pension in Korea
○ Korea developed the two-tier (basic-national) pension system through 2007 National Pension Scheme reform.
▶ Theory of the Multi-Tier Model and the Plural Model within the Same Tier
○ 'Multi-tier model' is desirable in public pension system.
- In the multi-tier model, each tier performs a different function, resulting in a positive effect due to combination of different functions.
○ ‘Plural model within the same tier’ raises negative effects.
- The 'plural model within the same tier' has negative consequences due to the effect of conflicts between institutions.
○ The relationship between the NPS and the GEPS can be understood as a "multi-member model" that exists on the same second floor, and it is desirable to be reorganized into a single unit to eliminate negative effects.
▶ Reviews at Legal Principle Level
○ The difference in the benefits of the system between the GEPS and the NPS can be debated as a matter of equality.
- It is difficult to find any reasonable reason in the discrimination of pension benefits within the same second tier.
○ The Vocational Public Service System and Social State Principle can be understood as a constitutional basis of the GEPS.
- However, this can be understood as the basis for calling for the formation of a pension system for public officials, but not as the basis for calling for the formation of a pension system exclusively of public officials.
○ The law provision stipulating the state's obligation to provide unlimited funding support in case of the depletion of the Government Employees Pension Fund cannot be regarded as a final and complete financial solution.
- Such attitude is a natural legal premise applicable to all public pensions that the problem is left the same state as before, so pension reform is still necessary.
○ As an insurance law principle, it is desirable to form an insurance community as a whole according to the law of algebra, and according to the principle of social solidarity, it is desirable that the second tier of public pension system encompasses all members of society.
▶ Implications from the Case of Unification of Public Pension in Japan
○ In 2012, Japanese Public Employees Pension was adjusted the same as the private Welfare Pension, the retirement allowance was newly separated, and the organization still remained the same.
- This method can be applied equally to the GEPS reform in Korea.
▶ Methods for Public Pension Fund Integration
○ First, the Government Employees Pension should be divided into two parts of the National Pension and other retirement pension.
○ It is reasonable to recognize a proportional contribution to the existing subscription period to protect their institutional trust.
○ The existing organization will remain the same because the Government Employees Pension service will exist for a considerable period of time in the future.
Ⅲ. Expected Effects
▶ By presenting a theory of the Multi-Tier Model and the Plural Model within the Same Tier, the problematic relationship between the GEPS and the NPS can be clarified and institutional reform also can be justified therefrom.
▶ The institutional integration of the NPS and the GEPS would not be greatly effective in correcting fiscal imbalances or expanding the size of insurance community, but it surely can elicit a long-term benefit in achieving goals of multi-tiered development of the public pension system by strengthening social solidarity and public institutional trust.