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Thursday, Sep. 13, 2012

EDITORIAL

Withholding pension premiums

The health and welfare ministry has announced that nearly 163,000 companies failed to pay premiums into the Kosei nenkin system, a pension plan for corporate workers, in fiscal 2011. Since Kosei nenkin is an important fund for retired workers, company executives should realize their social responsibility and fulfill their duty. According to the law, companies must shoulder half the premiums for the Kosei nenkin system.

The ministry's report shows that the number of companies that failed to pay the premiums in fiscal 2011 reached 162,735, an increase of 274 from the previous fiscal year. The total accounts for about 10 percent of Japan's companies.

The amount of premiums in arrears was about ¥450 billion, slightly lower than in the previous fiscal year. The trend of falling behind on payments has continued since the Lehman Brothers financial shock of 2008. Many of the companies that have failed to pay premiums are small to medium in size, and their businesses are very likely to be in bad financial shape.

To help rectify the situation so that more companies comply with the obligation to pay pension premiums, the government must take earnest measures to help pull the Japanese economy out of its long period of deflation. Prime Minister Yoshihiko Noda should realize that merely increasing the consumption tax rate could ruin both the economy and Japan's social welfare system.

Within the government, an optimistic view prevails based on the fact that 98 percent of the required Kosei nenkin premiums are paid up. This view often compares the premium collection rate with that for the Kokumin nenkin system, a pension plan intended mainly for self-employed and jobless people. The collection rate for the Kokumin nenkin plan is less than 60 percent. This is the percentage of people who have paid the premiums. Comparing this with the Kosei nenkin collection rate for companies is illogical.

The optimistic view also fails to take into account the close link between the Kosei and Kokumin pension plans. Since the Kokumin nenkin plan is suffering from chronic fund shortages, it cannot provide the required pension obligations on its own. Therefore, it is receiving financial support from the Kosei nenkin plan.

According to the settlement of accounts for Kosei nenkin, it had a surplus of about ¥600 billion in fiscal 2011. But this is tricky bookkeeping. The surplus was possible only because ¥5.6 trillion was transferred to the plan from its reserve fund. The real situation is that the Kosei nenkin plan would show a deficit of some ¥5 trillion if the transferred amount was excluded. If the nonpayment of premiums continues, the situation will become worse.

The health and welfare ministry must strengthen measures to pressure companies and people failing to pay Kosei and Kokumin nenkin premiums to fulfill their duty. At the same time, the government must push measures to stimulate the economy to help companies and people get out of their financial difficulty.



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