Social Security Bulletin • Vol. 67 • No. 3 • 2007
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Summary
This article examines the development of
Japanese voluntary employer-sponsored retire-
ment plans with an emphasis on recent trends.
Until 2001, companies in Japan offered retire-
ment benefits as lump-sum severance pay-
ments and/or benefits from one of two types of
defined benefit (DB) pension plans. One type
of DB plan was based on the occupational pen-
sion model used in the United States before the
adoption of the Employee Retirement Income
Security Act of 1974 (ERISA), but lacked the
funding, vesting, and other protective features
contained in ERISA. The other type of DB
plan allowed companies to opt out of the earn-
ings-related portion of social security, com-
monly referred to as “contracting out.”
Landmark laws passed in 2001 introduced
a new generation of occupational retirement
plans to employers and employees. One law
increased funding requirements and enhanced
employee protections for employer-sponsored
DB plans, while a second law introduced
defined contribution (DC) plans for several
reasons, chiefly to increase retirement savings
and help boost Japanese financial markets.
These laws complemented earlier changes in
the tax code and financial accounting stan-
dards already affecting employer-sponsored
retirement plans. As a result, new retirement
plan designs will replace most prereform era
company retirement plans by 2012.
In 2001, the experience of 401(k) plans in
the United States, where 42 million partici-
pants had accumulated more than $1.8 trillion
in assets over 20 years, attracted considerable
attention among Japanese lawmakers finalizing
provisions of the DC pension law. Even with
government support and encouragement from
the financial services industry, Japanese com-
panies have not adopted these new DC plans in
large numbers. As a result, occupational retire-
ment plans in Japan have remained predomi-
nantly DB—a surprising development in light
of the shift in a number of countries from DB
to