Old-System Retirement Savings Welcome 'Going New'! Experts Advise Tax Tips: Pure Old-System Self-Contributions Enjoy 3 Major Tax Benefits

New regulations under the Labor Standards Act regarding old-system labor retirement funds have taken effect. The revised Enforcement Rules of the Labor Pension Act, effective July 17, now allow pure old-system workers to voluntarily contribute up to 6% of their monthly wages to their personal pension accounts. Additionally, eligible workers may, by mutual agreement with their employer, settle their old-system retirement funds early and transfer the full amount into their personal account, gaining access to three major tax benefits under the new system—minimum return guarantees and exemption from annual salary income taxation—offering more diverse pathways for retirement asset accumulation.

Following the July amendment to the Enforcement Rules of the Labor Pension Act, pure old-system workers now have a new mechanism to voluntarily accumulate retirement assets. Chen Chih-Kai, a practicing CPA at KPMG安侯建業 Tax and Investment Advisory Services, explained that the core purpose of this amendment is to enable pure old-system workers to make self-contributions and enhance their savings and investment returns by settling their old-system benefits early and transferring them into personal accounts. Employers may not reject a worker’s application for self-contribution, and any old-system retirement funds settled by mutual agreement between employer and employee must be fully transferred into the personal account—partial or no transfer is not permitted.

On the tax front, Chen highlighted three key tax implications. First, self-contributed pension amounts are excluded from annual salary income and are not taxed, following the monthly wage classification table. Second, old-system retirement funds settled early and transferred into the personal account are not taxed at the time of transfer since the worker has not yet actually received the funds; taxation will occur only when the funds are withdrawn in the future under retirement income rules. Third, when retirement funds are actually withdrawn, they are taxed as retirement income. Once the worker reaches age 60 or meets disability criteria, all amounts—including self-contributions, transferred settlement funds, and accumulated earnings—are combined into retirement income, with taxation applied only to amounts exceeding the fixed tax-exempt threshold.

Chen further explained that if old-system retirement funds accumulated after early settlement are not transferred into the personal account and are instead paid separately upon termination of employment, to prevent double use of the tax-exempt allowance, these amounts must be combined with any previously withdrawn funds from the personal account when calculating retirement income, and tax is levied only on the portion exceeding the fixed tax-exempt threshold. Chen also emphasized that while this amendment extends the self-contribution mechanism to pure old-system workers, it does not change their status as old-system employees. Employers are not required to make new-system pension contributions on their behalf and must continue to set aside retirement reserves and recognize related expenses based on service years accumulated after settlement.