An illegal practice by the Social Insurance Agency came to light last week. Social insurance offices in Osaka, Nagasaki and 24 other prefectures have waived premium payments into the national pension (kokumin nenkin) program by more than 110,000 low-income people without their application.
Such a practice could undermine the kokumin nenkin plan, which is mainly for self-employed people, full-time housewives and unemployed people but also serves as the basis of the kosei nenkin pension plan for company employees and the kyosai nenkin pension plan, which is primarily for public servants.
The Health, Labor and Welfare Ministry should thoroughly investigate the practice — which is dubious at best and illegal at worst — and punish those officials and workers involved.
Low-income people are allowed to file an application to waive their kokumin nenkin premium, which is 13,860 yen a month. The waiver prevents a deduction of the period of nonpayment from the overall enrollment period and those who receive it will eventually qualify for at least one-third of the national pension. But if people simply fail to pay the premium without applying for a waiver, they may lose their right to receive a pension. The social insurance offices implicated in the questionable practice explain that they have taken the waiver procedure on behalf of low-income people so that they will not lose their pension rights.
Their action appears benevolent. But its long-term effect will damage the kokumin nenkin scheme. Agency workers should know that the scheme is supported by both tax money and premiums paid by all adults, including those covered by the kosei and kyosai nenkin schemes. If the number of people exempted from paying premiums increases, those who pay into the nation’s pension system will have to shoulder an additional burden.
Agency workers involved said they took the waiver procedure because people would not respond to repeated requests to apply for the waiver. Although they appear to be very kind public servants, they forget the fact that their action will eventually undermine trust in the pension system.
The Social Insurance Agency, which is under the Health, Labor and Welfare Ministry, says that agency workers applied for waivers for at least 82,000 people, including some 37,400 in Osaka Prefecture, 10,000 in Saitama Prefecture, 9,600 in Kyoto Prefecture and 5,200 in Nagasaki Prefecture, without obtaining their consent. They did the same for at least 14,000 people after getting their consent by telephone and through other means but without receiving a formal application from them. The agency has started a procedure to revoke the waivers for the first group. There are also cases in which people submitted applications after learning that the waiver procedure was taken without their knowledge, but that number is unknown.
In the case of Osaka Prefecture, 16 of the 21 social insurance offices sent letters to about 63,300 people from November 2005 to March 2006. The letter said if the addressees’ financial status qualified them for a premium waiver, the offices would submit an application on their behalf. It then asked the addressees to contact the offices if they did not want a waiver. The offices obtained waivers for about 37,400 people who did not respond. Reports from municipal governments enabled the offices to learn the people’s income levels.
The agency explains that workers took the questionable action to help the agency reach its goal of raising the premium collection rate to 80 percent by the end of fiscal 2007 (it was only 66.7 percent as of the end of March). The premium collection rate is obtained by dividing the aggregate number of months over which people have actually paid premiums by the aggregate number of months over which people must pay premiums.
An increase in the number of premium-payment exemptions reduces the value of the denominator in the calculation formula, thus increasing the premium collection rate.
The waiver system is reasonable in view of the fact that some people cannot afford the monthly 13,860 yen premium. But the ministry and agency’s first duty is to persuade people to pay the premium. In cases where it becomes clear that people cannot afford the premiums, ministry and agency workers should then advise them to submit a waiver application. At present, only full exemptions and half exemptions are available. From July, quarter exemptions and three-quarter exemptions will become available, increasing the system’s convenience.
To boost the number of premium payments, the ministry should also make serious efforts to publicize the advantages of the kokumin nenkin system. One-third of the kokumin nenkin pension is covered by tax funds and there are plans to raise this share to one-half in the future, so even those who don’t pay any premiums may still qualify for half the pension.
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