DC Plan
- Corporate type
- Corporate DC plan managed in accordance with the corporate DC plan provisions. Emsponsored ployer must contribute and from January 2012 onward employee contribution becomes available too.
- Individual type
- Self-employed and employees whose employer does not offer corporate DC plan or defined benefit plans can join the individual DC plan and contribute by themselves.
(1) Contract type
1. Contributions
DC plan in Japan was originally set up as non-contributory plan, and the employee contributions became available in 2011 (to start in January 2012).
Contribution cap:
-JPY25,500 per month (306,000 yen per annum) for the participants of EPF, DB plan, TQPP, Private School Teachers' Mutual Aid Scheme, Coal Mining Pension Fund (the Article 11 of the Enforcement Order of the Defined Contribution Pension Act)
-Other than above: JPY51,000 per month (612,000 per annum)
Contributions need to be set forth in the DC plan provisions based on the either of the following methods:
Fixed amount for everyone
Fixed percentage of salary
Others (use of point-based salary etc.)
2. Benefits
DC plan is an old age pension plan, and the account cannot be cashed out before age 60 in principle except in the case of death and disability. A hardship withdrawal is not allowed but if the asset balance is below 15,000 yen or certain conditions are met, early withdrawal is permitted.
3. Investment
Investment risk is entirely borne by the participants.
The sponsoring company and financial institution must provide ample information on investment products, methods, and opportunities for switching to the participants.
(1) Investment instructions
by participants
(2) Investment products
term deposit, securities (corporate bonds, government bonds, equities, mutual  funds), insurance products etc.
Note: Movable property and real estate futures, commodity futures are not permitted
(3) Offer
At least three products or more (one of them must be principal-guaranteed)
Must offer switching opportunities as frequent as once every three months at least
Financial institutions must provide the participants with information on expected return, possibility of loss, risk & return features of each product.
(4) Sponsor obligations
It is prohibited to recommend a particular product.
The sponsoring employer shall endeavor to provide general information on investment (basic knowledge on investment, diversification approaches etc.) to the participants continuously through consignment to plan administrator etc.
4. Portability
5.Taxes
Contributions: employer contributions are corporate tax deductible and not considered taxable income to the employees. Employee contributions are tax deductible but not deducted from social insurance premiums)
Investment return: tax deferred, special corporate tax applies to the assets but this is frozen until 2013
Benefits received:
- Old age pension: miscellaneous income (same deduction as public pension applies), lump sum: retirement income deduction applies (contribution periods are considered service period)
- Disability pension or lump sum: non taxable income
- Survivor's lump sum: inheritance tax
- Early withdrawal lump sum: occasional income