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V. Conclusion
Due to the life expectancies getting longer in Taiwan, how could let people maintain the basic living after retiring is an important topic we should concern. In order to build up a complete Labor Insurance pension protection system and offer the insured person or insured person’s dependents long term living care, the system has added pension benefits on January 1, 2009. After the implementation of Labor Insurance pension program, the insured could select the old-age one-time benefit or monthly pension benefit when they retire. Therefore, which benefit approach is better is an important concern for retiree.
In this study, we apply the concept of liquidity premium (Browne et al, 2003) which measure the theoretical yield that annuitized benefit should provide to insured and the implied longevity yield (Milevsky, 2005) that calculate the actual return of the annuitized benefit to compare the old-age one-time benefit and pension benefit under Labor Insurance. Our main results are as follows: We find the lower level of risk aversion, higher market return, lower volatility, and younger retire age all appear to imply a larger liquidity premium. Compare with the implied longevity yield, assumed the insured retiree at age 60 have 15, 20, 30, and 35 coverage years and three different insurance salaries. We observe the ILY values are greater than the liquidity premium in all situations. The 15 coverage years corresponds to the highest ILY value, then ILY decreased by age. But while coverage years exceed 30, ILY will be an increasing function of years. Concerning the insurance salary, the lower the insurance salary, the higher ILY will obtain as coverage years are less than 30. Last, the female’s ILY values are always greater than the male’s.
According to the numerical results, we find the ILY that pension benefit provided
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is greater than the theoretical yield needed to compensate for the retirees. In addition, the retiree chooses the pension benefit could get stable income each period, and pension benefit provide higher rate of return than many other investment assets. We would recommend the retiree to choose the annuitized old-age pension payment rather than the one-time old-age benefit.
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The 9th Period (1999~2001) Taiwan Life Table
Age Probability of dying qx Age Probability of dying qx
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Age Probability of dying qx Age Probability of dying qx
X Male Female X Male Female
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Appendix B Table of Grades of Insurance Salary
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Appendix C Labor Insurance Act
Last Amended on April 27, 2011
CHAPTER 1 GENERAL PRINCIPLES
Article 1 This Act is enacted to protect workers' livelihood and promote social security. Matters not provided herein shall be governed by other relevant laws or regulations.
Article 2 The types and benefits of Labor insurance coverage are categorized as the following:
1. Ordinary insurance: There are five different kinds of benefits which are maternity benefits, injury or sickness benefits, disability benefits, old-age benefits and death benefits.
2. Occupational accident insurance: There are four kinds of benefits which are injury and sickness benefits, medical-care benefits, disability benefits and death benefits.
Article 3 All labor insurance books and accounts, documents and operational receipts and payments shall be exempt from taxation.
Article 4 Council of Labor Affairs of the Executive Yuan and the municipal government shall be the competent labor insurance authorities.
CHAPTER 3 INSURANCE PREMIUM
Article 13 The insurance premium of labor insurance is calculated using the insured person's monthly insurance salary and insurance premium rate.
The ordinary insurance premium rate is 7.5% ~13% of the insured person's monthly insurance salary; the insurance premium rate was 7.5% when the amendments of this Act was promulgated and enforced on July 17, 2008, three years after the new regulation is enforced, the premium rate will be increased by 0.5%. Since then, 0.5% will be added to the insurance premium rate every year until the rate reaches 10%. From the year when the insurance premium rate reaches 10%, the rate will then be increased by 0.5% every two years until the rate reaches the upper limit of 13%. However, when the balance of the insurance fund is enough to pay
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the benefits for the next twenty years, the insurance premium rate will not be increased.
The occupational accident insurance premium rate is divided into two types which are Business Category Accident Premium and On and Off Duty Accident Premium. The occupational accident insurance rate will be prescribed by competent central authority, reported to the Executive Yuan for review and approval, and sent to the Legislative Yuan for reference; and shall be adjusted once every three years.
For the insured units that employ a certain number of employees, the Business Category Accident Premium rate in the former paragraph will use Experience rate schedule which is calculated and adjusted annually by the insurer using the percentage of the total amount of occupational accident insurance benefit paid in the former three years to the total payable amount of occupational accident insurance premium payable according to the following regulations:
1. For those exceed 80% of the total payable amount of occupational accident insurance premium payable, 5% of the applicable business category of occupational accident insurance premium rate will be additionally charged for every 10% increase until the premium rate reaches the 40% upper limit.
2. For those lower than 70% of the total payable amount of occupational accident insurance premium payable, 5% of the applicable business category of occupational accident insurance premium rate will be deducted for every 10% decrease.
The Experience Rate regulations shall be prescribed by the competent central authority.
The insurer shall separately handle the accounting of occupational accident insurance.
Article 15 Labor insurance premiums shall be calculated and paid in accordance with the following measures:
1. As specified in article 6, paragraph 1, subparagraphs (1) to (6), inclusive, and article 8, paragraph 1, subparagraphs (1) to (3), inclusive, in the case of an insured person, twenty percent of the premium of ordinary insurance shall be borne by the insured person, seventy percent paid by the insured unit, and the remaining ten
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percent shall be subsidized by the central government. The occupational accident insurance premium shall be borne in full by the insured unit.
2. As specified in article 6, paragraph 1, subparagraph (7), in the case of an insured person, sixty percent of ordinary and occupational accident insurance premiums shall be borne by the insured person, and the remaining forty percent shall be subsidized by the central government.
3. As specified in article 6, paragraph 1, subparagraph (8), in the case of an insured person, twenty percent of ordinary and occupational accident insurance premium shall be borne by the insured person, and the remaining eighty percent shall be subsidized by the central government.
4. As specified in article 8, paragraph 1, subparagraph (4), in the case of an insured person, eighty percent of ordinary and occupational accident insurance premiums shall be borne by the insured person, and the remaining twenty percent shall be subsidized by the central government.
5. As specified in article 9-1, in the case an insured person, eighty percent of the insurance premium shall be borne by the insured person, and the remaining twenty percent shall be subsidized by the central government.
Section 6 Old-Age Benefits
Article 58 An insured person who is at least 60 years of age and has any of the following conditions may claim to receive old-age benefits:
1. An insured person whose insurance coverage year reached over fifteen could claim for old-age pension benefit.
2. An insured person whose insurance coverage year has not reached fifteen could claim for a lump sum old-age benefit.
For those who already have insurance coverage years before the promulgation and enforcement of the amendments for this Act on July 17, 2008 and conform to any one of the following regulations, the insured not only could claim for old-age benefit according to the regulation in preceding paragraph, he/she could also choose to claim for a lump sum old-age benefit. However, if the insurer has approved the
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onetime payment, it could not be changed anymore.
1. An insured person at least sixty years of age or a female insured person at least fifty-five years of age who has been insured for at least one year and resigns;
2. An insured person whose insurance coverage reached over fifteen, who is at least fifty-five years of age and resigns;
3. An insured person who has been insured in the same insured unit for over twenty-five year and resigns; or
4. An insured person whose insurance coverage reached over twenty-five years, who is at least fifty years of age and resigns;
5. An insured person who has been employed for more than five year in physical hard labor, work of special character and who is at least fifty-five years of age and resigns.
An insured person who has claimed and received old-age benefits according to the preceding two paragraphs should be discharged from this labor insurance.
The insured claim for old-age benefit is not bounded by the regulation of Article 30.
On the tenth year after this amendment is promulgated and enforced on July 17, 2008, the age limit for claiming old-age benefit in first paragraph will be increase by one year and then the limit will be raised by one year for every two years until the limit reaches 65 years of age.
An insured person who has received old-age benefits may no longer participate in the labor insurance.
An insured person who has been employed for more than fifteen years in dangerous, physical hard labor or work of special character and is at least fifty-five years of age and resigns could claim for old-age benefit and is not bounded by the regulations in fifth subparagraph of this Article and Article 58-2.
The meaning of dangerous, physical hard labor or work of special character in the fifth subparagraph of second paragraph and previous paragraph is to be defined by the competent central authority.
Article 58-1 Old-age pension benefit will be calculated and chose one based on the most advantageous method of the following:
1. The monthly pension amount is calculated as 0.775% of average
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monthly insurance salary for each single insurance coverage year plus 3,000 NT dollars.
2. The monthly pension amount is calculated as 1.55% of average monthly insurance salary for each single insurance coverage year.
Article 58-2 Insured persons who have conformed with the old-age benefit claiming criteria in first subparagraph of first paragraph and fifth paragraph of Article 58 but have postponed in claiming the old-age pension benefit, extra 4% of the pension benefit amount calculated using the method in preceding Article will be granted for each year of pension benefit claiming postponement with the upper limit of 20% extra.
An insured person who has more than fifteen years of insurance coverage but doesn’t reach the claiming age stipulated in first paragraph and fifth subparagraph of Article 58 could claim for old-age pension benefit within five years in advance. However, 4% of the pension benefit amount calculated using the method in preceding Article will be deducted for each year of pension benefit claiming advancement with the upper limit of 20% deduction.
Article 59 An insured person who claims a lump sum old-age benefits payment in accordance with the provisions of subparagraph two of paragraph 1 and paragraph 2 of Article 58 shall receive one-month’s old-age benefits for each one of his/her insurance coverage years computed on the basis of his/her average monthly insurance salary; in case the insured person’s insurance coverage year exceeds fifteen years, the insured person shall receive two-month’s old-age benefits for each one of the excess years, provided that the maximum amount of old-age benefits payment shall not exceed forty-five months of insurance salaries.
In case an insured person continues to work after attaining sixty years of age, his/her insurance coverage above that age shall not exceed five years. The maximum benefit payment amount shall not exceed fifty month’s insurance salaries including the old-age benefits receivable before he/she attained sixty years of age.
Section Eight Application and Issuance of Pension Benefits
Article 65-1 The insured person or his/her beneficiary who conform to the claiming criteria of pension benefit should fill in an application and attach the related
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documents to apply to the insurer.
When the insured person or his/her beneficiary in previous paragraph has been examined by insurer as qualified, the pension will be issued monthly from the month of the application until the month of pension termination.
In case the beneficiary of survivor's pension doesn’t submit application on the month they qualify for the benefits, the insurer should reissue the benefits to those who are entitled tracing back to five years before they submitted the application. However, for the part which already claimed by other beneficiary would not be included.
Article 65-2 The insurer may verify the benefit applications made by the insured person or the survivors and suspend payment during the verification period. Once applications are verified and approved, payment during the suspension period shall be paid and regular payments shall resume.
Once recipients are not qualified for receiving pension payments or die, they themselves or the heir at law should present related documents and notify the insurer within 30 days since the happening of the above facts. Pension payments will be terminated from the next month of the happening of the above facts.
When benefit recipient dies and the payable benefit is not yet wired into the recipient’s account, the heir at law is entitled to present the copy of household registration transcript which marked the death of the applicant and the copy of household registration transcript for the heir at law to apply for the receiving of payment. When there are more than one people as the heir at law, they shall present warrant of joint-attorney and a recognizance entrusting one of them to apply for the receiving of the payment.
When over pension payments resulted from recipient’s failure or the failure of heir at law to notify the insurer according to Paragraph 2, the insurer shall send written notices to the recipient of the over payment requesting repayment within 30 days. The insurer is also entitled to deduct the over payment from the account used in receiving the benefits.
Article 65-3 The insured person or his/her beneficiary is entitled to apply for only one kind of benefits if he or she is qualified for disability pension, old-age pension payments, or survivor's pension benefit at the same time.
Article 65-4 The amount of pension for this insurance will be adjusted according to the
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accumulated growth rate of Consumer Price Index published by the Budget, Accounting and Statistics institutions in the central government if the accumulated rate reaches 5%.
Article 65-5 Should Insurer or Labor Insurance Supervisory Commission needs some necessary data for handling this insurance business, they could contact related government agencies to supply related data and those agencies could not reject such request.
The insurer or Labor Insurance Supervisory Commission should ensure the safety check on the operation of information. All keeping, processing and utilization of such information shall follow the regulations of Computer-Processed Personal Data Protection Act.
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