Since the relevant acts were amended, the National Health Insurance Service (NHIS) has been collecting contributions for all social insurance programs (National Pension, Health Insurance, Employment Insurance, Industrial Accident Compensation Insurance) since Jan. 1, 2011.
Therefore, administrative affairs related to collecting contributions, such as the issuance of notices for the payment of contributions determined by NPS, solicitation for the payment and disposition of arrears, are conducted by the NHIS.
Contact Information of the NHIS : 82-2-390-2000 (English Consulting)
The National Pension Scheme is a social insurance program. Accordingly, the funds required for benefit payments are mainly acquired from contributions made 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 of their contributions by themselves. The government's financial support is temporarily provided for some portion of contributions paid by farmers and fishermen.
The contribution rate was set low at the initial stage of the scheme and has been gradually increased, with consideration of its effects on the national economy, for the purpose of alleviating the financial burden on insured persons and employers.
The contribution rate for both Workplace-based Insured Persons and Voluntarily & Continuously Workplace-based Insured Persons was raised from 3% in 1988, to 6% in 1993, and to 9% in 1998. During the period from 1988-1992, the contribution of Workplace-based Insured Persons was equally shared by employee and employer. And, from 1993 to 1998, the contribution was equally shared by the employee, employer, and Retirement Payment Reserve. However, since April 1999, both the employee and the employer have been sharing the responsibility of paying contributions. But Voluntarily & Continuously Workplace-based Insured Persons should pay all their contributions by themselves.
Table 1 shows the contribution rate of Workplace-based Insured Persons and Voluntarily & Continuously Workplace-based Insured Persons.
※ Retirement Payment Reserve: Pension contributions appropriated from the deducted portion of employees’ severance pay. This was repealed by an amendment of the National Pension Act in April 1999.
|Voluntarily & Continuously
The contribution rate for Individually Insured Persons and Voluntarily & Continuously Insured Persons was 3% from July 1995 to June 2000 and began to increase annually by 1% from July 2000 until it reached 9% in July 2005. Workplace-based Insured Persons also have the contribution of 9%. The government has provided farmers and fishermen with financial subsidies since July 1995.
The contribution rate for Voluntarily Insured Persons and other Voluntarily & Continuously Insured Persons was set at the same level as that for Workplace-based Insured Persons during the period from 1988 to March 1999. But as mandatory coverage extended to the general public in April 1999, the contribution rate was applied at the same rate used for Individually Insured Persons, in order to achieve equity with Individually Insured Persons and Voluntarily & Continuously Individually Insured Persons.
Table 2 shows changes in the contribution rate for Voluntarily Insured Persons and Other Voluntarily & Continuously Insured Persons.
The contribution is calculated by multiplying the insured person's Standard Monthly Income by the contribution rate. Monthly Income is the amount equivalent to the monthly income reported by an employer or the insured person, within the scope of a minimum of 270,000 won, but not exceeding 4,210,000 won. (Amounts less than one thousand won are rounded off. And the range of Standard Monthly Income is adjusted on July 1 of every year.) The Standard Monthly Income is a basis for the calculation of contributions and is also an important factor for the calculation of pension amounts.
The Standard Monthly Income of an insured person who initially gained or regained insured status is the amount reported by the employer. The Standard Monthly Income of an insured person who worked more than 30 days in the previous year is adjusted every July based on the taxable income under the Income Tax Act of the previous year. It is applied from July of the relevant year to June of the next year. The income of the employer at a non-corporate workplace is the income earned from business.
The income of Individually Insured Persons and Voluntarily & Continuously Insured Persons is equal to the amount gained by summing agricultural income, forestry income, fishery income, earned income, and business income. These terms are defined below.
Agricultural income is defined as income gained from sowing, growing fruit, horticulture, silk raising, planting seedlings, raising of special crops, raising livestock, breeding stock or hatching, and accompanying services)
Forestry is defined as income gained from forest management, forest products, raising of wild birds and animals, and accompanying services.
Fishery income is defined as income gained from fishery, and accompanying services.
Earned income is defined as the taxable earned income under the Income Tax Act.
Business income is defined as income gained from whole sale, retail sale, the manufacturing industry and other businesses.
For Voluntarily and other Voluntarily & Continuously Insured Persons, the Standard Monthly Income is the median value of the Standard Monthly Income of all Workplace-based and Individually Insured Persons as of December 31 of the preceding year. Their income may be reported as more than that, if they want to, but, if those protected under the National Basic Living Security Act want to be covered as Voluntarily Insured Persons, their income will be decided based on the amount gained by summing earned income and business income.
The employer is obliged to pay his portion of the contribution with the employee's contribution deducted from his/her wages. The Individually, Voluntarily, and Voluntarily & Continuously Insured Persons are responsible for paying all their contributions. In the event of failure to pay the contribution by the due date, an arrears fee will be imposed at a rate ranging from 3% to 9% of the contribution amount, according to the number of months delayed. The unpaid period is not considered as an insured period, and, if Voluntarily or Voluntarily & Continuously Insured Persons do not pay contributions for three consecutive months, they will automatically lose their insured status. The National Health Insurance Service's right to collect contributions and arrears fees is valid for 3 years. The total amount of pension contributions paid from the year 2002 is income tax deductible.
In the case where a mandatorily insured person has difficulty paying contributions due to termination of business, loss of employment, or an accident, etc., he/she can be exempted from paying contributions by his/her application during the relevant period.
Because the person does not pay contributions for the period of exception to payment of pension contributions, the period is not regarded as an insured period for the calculation of pension benefits, and, accordingly, the amount of pension benefits is diminished proportionately. The person, however, can be entitled to a Disability or Survivor Pension in the event of disability or death, because the person can maintain his/her insured status.
If an insured person under this exception begins earning income again, the person should report it to NPS and begin paying contributions.
People who have no income and fall under one of the following conditions can apply for exceptions to payment of pension contributions: When the insured person experiences termination of business, loss of employment, or suspension of business; when the insured person serves in the army when the insured person attends school; when the insured person is imprisoned;
- when the insured person is in confinement, under probation or in a treatment institution; when the insured person is missing for less than 1 year
- when the insured person's income has been reduced due to a disaster or accident or he/she is not engaged in economic activity.
An additional insured period is granted to a parent when he/she gives birth to more than two children. The average Standard Monthly Income for all insured persons over the last 3 years is used as the income for the relevant periods.
|Number of Children||2||3||4||More than 5|
|Additional Insured Period Granted||12 months||30 months||48 months||50 months|
Six months of additional insured period is granted to a person who has successfully finished his/her military service. One half of the average Standard Monthly Income for all insured persons over the last 3 years is used as the income for the relevant periods.
A person is able to increase his/her insured period by paying the contribution corresponding to the period of ‘Exceptions to Payment of Pension Contributions’ after resuming income-earning activities. Postponed contributions may be paid in a lump-sum or in installments.