Vice Premier Jiang Yi-huah today said he was glad to see the Democratic Progressive Party (DPP)—Taiwan's largest opposition party—propose an alternative pension reform plan, but that he was worried and puzzled because this plan would increase the premiums of 9.8 million workers.
Under the DPP plan, the government would cease to contribute to labor insurance premiums. Under the current system, the employer pays 70 percent; the employee, 20 percent; and the government, 10 percent. Under the DPP scheme, the employer would pay 60 percent, while the employee would shoulder the rest. The overall premium rate would be increased to 16.25 percent of the employee's monthly insured salary, and with workers paying 40 percent of that amount, their premium contribution rate would be 6.5 percent. This is almost double the Executive Yuan plans' projected employee contribution rate of 3.9 percent, Jiang pointed out.
While the DPP has only provided a general direction, there are no great fundamental differences between its plan and the Executive Yuan's, remarked Vice Premier Jiang, saying a consensus has clearly been reached on the calculation base for civil servants' and teachers' salaries, that the government should guarantee payments, and that pensions should be adjusted in accordance with the consumer price index (CPI).
The Executive Yuan's two proposed plans are more complete and consistent than the DPP's, and this difference would greatly impact citizens' rights and interests and the sustainability of the pension systems, Jiang asserted.
The vice premier compared the Cabinet's and the DPP's reform proposals in four aspects:
1. Premium rate and fund volume
The DPP proposed that the labor pension premium rate be raised to 16.25 percent over the next 30 years in order to ensure the fund's balance for 20 years. Jiang responded that the DPP failed to elaborate on how the premium rate adjusted upward. He also found its time frames confusing. He speculated that the DPP means that under its plan, 30 years from now, the system would still be healthy for another 20 years, for a total of 50 years of viability. If the DPP meant its plan could last 20 years from this year, until 2033, then there would be no reason for a change of the magnitude being discussed because the current system is not projected to go bankrupt until 2027, the vice premier said.
2. Premium contribution ratio
Under the DPP's 60-40 ratio described above, the government would not have a role or be held responsible for labor pension payments, while employees' premium responsibilities would double, Jiang said. Workers would pay almost double the percentage of their monthly insured salary—6.5 percent—under the DPP plan that they would under the Executive Yuan's plans, which ask for 3.9 percent. For example, a worker with an insured monthly salary of NT$30,000 (US$1,014) would pay NT$1,170 (US$39.5) under the Cabinet's pension reform but NT$1,950 (US$65.9) under the DPP's proposal. This difference would add up to NT$9,360 (US$316.4) per year.
3. Paying back the civil servants pension fund
The DPP has called for "social solidarity pension reform," with a new pension fund established for the new system and the old pension system's "hidden debts" paid by its beneficiaries and the government.
The vice premier said that the DPP, behind the slogan of "social solidarity," is asking retired government employees—including retired soldiers, civil servants and teachers—to give back annuities they have already collected to balance out the debts in the civil servants' pension fund, while at the same time asking the government to take sole responsibility for the appropriation of the labor insurance pension fund's debts. Rather than inspiring solidarity, this approach would incite hostilities between people of different occupations, Jiang said.
In contrast, under the Executive Yuan's pension reform plans, the government would decrease annuities for retired government employees by adjusting the payment calculation base and would cut their preferential deposit interest rate, which will considerably improve the pension system's financial status.
The government has also drafted an appropriation plan for the labor pension fund, so it is not necessary to set up a new fund or ask the retirees to give back their annuities. Moreover, many retired government employees chose to receive a lump-sum retirement pension and might have spent all of it. A law requiring them to pay back annuities received (according to their working years before 1995, the year the current system went into action) could cause panic throughout society, Jiang said.
4. Insured salary for tradesmen
The DPP has advocated that tradesmen adopt a fixed insured salary based on the national monthly basic wage and adjusted in accordance with the CPI. They would pay the same premium rate as those on the National Pension Fund, and their pension amount would be calculated based on their insured salary at the month of retirement.
The Executive Yuan responded that there should be no discrepancies between industrial and trade workers in the filing of their insured salaries, and that in principle all should be based on their exact earnings. Although some tradesmen may not report their exact income because their payment may vary month-to-month, and some have not reported honestly, the Bureau of Labor Insurance has recently strengthened its inspections to address these issues, and this is garnering good results.
The DPP plan to require trade workers to base their insurance on the national minimum monthly wage (currently at NT$18,780, or US$634) would be unfair and harmful to tradesmen who make a higher salary, the vice premier said.
Jiang also stated that the government pays great attention to the economic security of elderly people, and it announced its preliminary plan only after three months of scrupulous deliberations.
The government welcomes the presentation of an alternative reform plan by the DPP, the vice premier affirmed: "Although some differences exist in the two versions, this proposal is nevertheless a gesture of democratic goodwill which may serve as the basis for constructive dialogue. This is conducive to policy formation and the establishment of consensus."