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National Pension Scheme

Foreigners and Coverage

At the time of the introduction of the Scheme, foreigners were not mandatorily covered. Only foreigners

working in a workplace covered under the Scheme could be covered as an Workplace based Insured

Person by submitting an application.

Foreigners working at the workplace with more than 5 full-time employees were included in the mandatory

coverage in August 1995 and those working at the workplace with less than 5 employees including

self-employed foreigners were also included in the mandatory coverage in April 1999. Accordingly,

foreigners aged from 18 to less than 60 who reside in Korea must be, in principle, covered under the

Scheme. But foreigners falling under any of the following items are excluded from the coverage.

1)  Those whose country does not mandatorily cover Korean citizens under its pension scheme.

2)  Foreigners who are not registered under the Immigration Act, or to whom the forced deportation order

has been issued under the same Act, or who are staying in Korea without being permitted to extend

their term of stay.

3)  Among the registered foreigners under Immigration Act, those whose stay status falls under any of the

followings; culture & art, studying abroad, industrial training, general training, religion, visiting & living

together and others.

4)  People excluded from the mandatory coverage of National Pension Scheme, by the social security

agreement.

National Pension Scheme

Foreigners and payment of Lump-sum Refund

Foreign Insured Persons under the National Pension Scheme are equally treated as the national Insured

Persons. For example, there is no discrimination in terms of the benefit amount and remitting benefit

abroad, etc. But there is a certain distinction regarding Lump-sum Refund. In principle, Lump-sum Refund

is not paid to foreigners leaving Korea after having been covered under the Scheme. But, in the case of

foreigners falling under any of the following items, Lump-sum Refund is paid.

1)  People whose country grants Koreans a benefit corresponding to Lump-sum Refund under the National

Pension Scheme.

2)  People whose country concludes a social security agreement with Korea to secure benefit right by

totalling Insured period in each country.

National Pension Scheme

Contribution

The National Pension Scheme is a social insurance scheme. Accordingly, the expenditure required for

payment of benefits and others is mainly financed from contributions paid by Insured Persons and their

employers. The contribution of Workplace based Insured Persons is equally shared by the employer and

the employee (the Insured Person), while Individually Insured Persons, including Voluntarily Insured Persons

and Voluntarily ＆ Continuously Insured Persons, pay all amount of their contributions themselves. The

government's financial support is temporarily provided for some portion of contributions paid by farmers

and fishermen. On the other hand, some part of administration costs of the National Pension Corporation

is supported by the government because National Pension Scheme is enforced under its responsibility.

National Pension Scheme

Contribution Rate

The contribution rate was set low at the initial stage of the Scheme and has been gradually increased for

the purpose of alleviating the financial burden on the Insured Persons and employers, with consideration

of its effects on the national economy.

Also, the maximum limit of contribution rate will remain in the region of 9% until 2009 and will be adjusted

afterward according to the financial recalculation planned to be conducted every five years.

The contribution rate was raised from 3% in 1988, through 6% in 1993, and to 9% in 1998.

During the period 1988-1992, the contribution of the Workplace based Insured Persons was equally shared

by the employee and employer. And, during 1993-1998, the contribution was equally shared by the

employee, employer, and retirement payment reserve. However, since April 1999, each of the employee

and the employer has been taking a half of the responsibility of paying contributions. But Voluntarily &

Continuously Workplace based Insured Persons should pay all their contributions by themselves.

Social Security Agreement

What are the objectives of concluding a social security agreement?

A social security agreement is concluded to benefit the nationals of contracting countries through the

coordination of those countries' different social security systems. It has four basic objectives as follows:

First, the agreement is to reduce the financial burden on persons (e. g., detached employees and their

employers or self-employed persons) who would find themselves covered under and have to pay social

security contributions to the systems of two countries for the same work. As a result contributions are

paid to only one system of either country (Elimination of dual coverage).

Second, the agreement is to help persons (e. g., long-term residents or immigrants in the other country)

who have divided their careers between two countries acquire benefit eligibility by totalizing their periods of

coverage in both countries. Without totalization, benefits would not be acquired under a country's national

law alone as a result of insufficient periods of coverage (Totalization of periods of coverage).

Third, the agreement is to ensure that nationals from one country, who are subject to the applicable

legislation of the other country, be accorded the same treatment under the other country's social security

system as that country accords its own nationals in the application of that legislation. This includes

eligibility for and the payment of benefits (Equal treatment).

Fourth, the agreement is to guarantee that benefits are remitted without restrictions to persons who stay in

either country and who have acquired benefit eligibility under either or both system(s) of two countries

(Benefits remittance without restriction).

Social Security Agreement

Which legislation does a social security agreement apply to?

The legislation to which the social security agreement applies may be somewhat different, depending on

the way the social security laws of the contracting countries are organized.

Korea makes it a principle that only the National Pension Act be covered by the agreement. However,

under the agreements with the United States and Germany, the Industrial Accident Compensation

Insurance Act and the Employment Insurance Act have been included under the applicable legislation of

Korea, respectively.

Social Security Agreement

Which country's social security legislation applies to an individual?

An employee is insured in the country where s/he exercise occupational activity. For example, a Korean

national employed in the United States is only subject to the U.S. legislation on social security and is

exempt from the corresponding Korean legislation. Also, a Canadian citizen employed in Korea is only

covered under the Korean legislation on social security and is exempt from the corresponding Canadian

legislation.

If an employee is employed in one contracting country, but transferred to work in the other contracting

country for a temporary period, s/he is not subject to the legislation of the other contracting country and

remain insured under the legislation of the first contracting country.

If a person is self-employed, s/he is subject to the legislation of residing country under the agreements

with the United States, the United Kingdom, Canada, China and the Netherlands. Under the agreement with

Germany, s/he is subject to the legislation of the country where s/he exercises self-employment activity.

A Korean national who resides in Korea and who is engaged in a self-employment activity in the United

States is covered under the Korean legislation and is exempt from the U.S. legislation.  However, A Korean

national who has permanent residence in Korea and who exercises a self-employment activity in Germany

is covered under the German legislation and is exempt from the Korean legislation, irrespective of where

that person has permanent residence.

Social Security Agreement

Who is eligible for a Korean Lump-sum refund?

If your country has a totalization agreement social security with Korea, you are treated like other Korean

nationals regarding a lump-sum refund, as well as pension benefits under the legislation of Korea.

Therefore, if you die or permanently leave Korea, or reach age 60, or meet other qualifying conditions for

the Lump-sum refund before qualifying for an Old Age, Disability or Survivors pension, the Lump-sum

refund may be paid to you or your survivors (in case of your death).

If your country does not have a social security agreement with Korea, you are not treated equally with

other Korean nationals regarding the lump-sum refund, but are treated according to a reciprocity rule.

Under this rule, only the nationals from 27 countries※ may receive the Korean lump sum refund. Please

refer to Article 102 of the National Pension Act and Article 85-3 of the Enforcement Decree of the National

Pension Act.

※ Venezuela(if completed at least 24 months of periods of contributions) ; Grenada, Nigeria,

Barbados, Saint Vincent and Grenadines, Zimbabwe, Cameroon, Congo, Thiland, Togo(for the above 9

countries, if completed at least 12 months of periods of contributions) ; Belize(if completed at least 6

months of periods of contributions) ; Ghana, Malaysia, Bermuda, Sudan, Sri Lanka, Switzerland, El

Salvador, Jordan, India, Indonesia, Kazakhstan, Kenya, Trinidad and Tobago, HongKong, Turkey,

Colombia ; (as of December, 2004)