The Japanese government has raised the legal maximum contribution limit being imposed on employer contributions to Defined Contribution plans as follows.

Current situation:

• Employers are allowed to design a Corporate DC plan with a maximum monthly contribution per employee capped at JPY 46,000 (if the company does not sponsor an additional funded retirement plan), or at JPY 23,000 (if the company does sponsor an additional funded retirement plan).
  
  
• No employee contributions are allowed.

The changes are:

• The employer contribution caps will go up to JPY 51,000 (from 46,000 for companies with no other funded retirement plan), and to JPY 25,500 (from JPY 23,000 for companies combining the DC plan with another funded retirement plan).
  
  
• The plan to amend the DC Law to allow employee contributions stalled as one of the Houses of the Diet has been dissolved and as a result the proposed laws under discussion have been scrapped.

Timing:

The changes on the contribution limits will be enforced from January 1, 2010.

For further information regarding this information, please contact the Retirement, Risk and Finance Consulting team at Mercer Japan.