Japan proposal on contribution limits could hurt
Japan’s regulators are moving to put “fairer” contribution limits for corporate defined contribution plans in place this year but analysts warn their proposed changes could just as easily shrink Japan’s DC market as expand it.
Along the way, some of Japan’s biggest corporate plan sponsors could be forced to restructure the mix of DC and defined benefit retirement plans they offer to employees.
At issue are current rules that mandate across-the-board reductions in DC contribution ceilings for companies that also offer defined benefit plans.
In contrast to the U.S. 401(k) system, where regular deductions from employees’ paychecks powers growth, companies are the main contributors to Japan’s corporate DC asset pool, which has grown to more than ¥12 trillion ($112.9 billion) since the country put its DC framework in place almost 20 years ago.
DB plans, meanwhile, remain the core of Japan’s corporate retirement system with ¥63 trillion in assets — roughly five times the size of DC.
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