Major Labor Reform Takes Effect! 5 Key Changes to the New Labor Retirement System to Be Implemented Nationwide Starting August 1

Starting August 1, 2026, the labor retirement system will enter a new phase, clearly safeguarding workers' rights to voluntarily contribute to their retirement funds. A new mechanism allows workers who initially choose monthly pension withdrawals to switch to a lump-sum payout within 30 days of the first disbursement. The reform also expands eligibility for self-contributions to workers under the old system and strengthens protections for retirement accounts and beneficiaries' rights. These amendments cover multiple aspects including pension withdrawal methods, self-contribution systems, and account protection, affecting an estimated 13.1 million workers across Taiwan who hold individual labor retirement accounts. Below is a comprehensive overview of the five major changes and the latest regulations.

What Changes Are Coming to the Labor Retirement System? 5 Key Reforms

1. A new '30-day reconsideration period' for monthly pension withdrawals: Workers who initially choose monthly payments can apply to switch to a lump-sum payout within 30 days of the first payment being credited. This change can only be made once.

2. Employers are explicitly prohibited from rejecting workers' applications for self-contributions or imposing discriminatory treatment as a result.

3. Previously limited to workers under the new retirement system, the self-contribution scheme is now extended to those still under the pure old system. Workers can voluntarily contribute 1% to 6% of their salary, enjoying tax benefits and accumulating funds in their personal accounts.

4. The reform strengthens protections for minor beneficiaries by resetting the statute of limitations for pension claims to begin upon reaching adulthood.

5. Protection of retirement accounts is further enhanced: Funds and earnings in the dedicated retirement account cannot be seized, offset, transferred, or used as collateral before withdrawal.

What Is the Difference Between Labor Insurance and Labor Retirement?

Many people confuse labor insurance (Laobao) with labor retirement (Laotui), but they are distinct systems. Labor insurance is a social insurance program jointly funded by workers, employers, and the government, providing benefits for childbirth, injury, disability, death, and old age. Labor retirement, on the other hand, is a pension system where employers are required to contribute at least 6% of a worker's salary to an individual retirement account each month, and workers may voluntarily contribute an additional 1% to 6%.

The two systems do not conflict; eligible individuals can receive both the old-age benefit from labor insurance and their labor retirement funds upon retirement, forming two primary sources of income. Moreover, the labor retirement account is individual-based, meaning the funds follow the worker regardless of job changes or company performance, with no risk of bankruptcy.

What Are the Benefits of Self-Contributing 6% to Labor Retirement?

Workers may decide under the Labor Retirement Act whether to contribute 1% to 6% of their salary to their retirement account. The self-contributed amount is fully deductible from the annual comprehensive income total.

For example, a worker earning NT$40,000 per month who contributes 6% (NT$2,400 monthly) can deduct NT$28,800 annually. At a 12% tax rate, this saves approximately NT$3,456 in taxes annually. For a worker earning NT$30,000 monthly, contributing 1,800 per month allows a deduction of NT$21,600 annually, saving about NT$1,080 at a 5% tax rate or NT$2,592 at 12%. For a worker earning NT$50,000 monthly and contributing 6% (NT$3,000), the annual deduction is NT$36,000, potentially saving between NT$1,800 and NT$7,200 depending on tax rates.

Beyond tax savings, the biggest advantage of self-contribution is accumulating retirement principal. If an employer contributes 6% monthly, after 30 years the account may accumulate approximately NT$2.5 million. Adding a 6% self-contribution could potentially double the total, significantly enhancing retirement security.

How to Apply for Self-Contribution to Labor Retirement?

Applying for self-contribution is simple. First, obtain the 'Voluntary Contribution Application Form for Labor Retirement Fund' from your company's HR department or download it from the Labor Insurance Bureau website, and fill in your desired contribution rate (1% to 6%). Submit the completed form to your HR or payroll department, and the company will automatically deduct the amount from your salary and deposit it into your personal retirement account. Finally, verify the deduction via your payslip or the Labor Insurance Bureau's e-service system. Contribution rates can be adjusted up to twice per year.

What to Do If Your Employer Refuses Self-Contribution? The New System Explicitly Prohibits Refusal

Starting August 1, 2026, employers cannot refuse workers' self-contribution applications due to administrative complexity or staffing shortages. If an employer refuses, keep written records and communications, and verify whether the deduction has been made. If the issue persists, file a complaint with the Labor Insurance Bureau, which will require the employer to rectify and make up contributions within a specified period. Violators may face additional late fees.

Lump-Sum or Monthly Payout: Which Is Better?

There is no absolute 'better' option for withdrawing labor retirement funds—it depends on personal needs. If you need a large sum after retirement—for example, to pay off a mortgage, cover medical expenses, start a business, or support children—a lump-sum payout offers greater flexibility. Workers with investment skills who can manage their funds may also achieve higher returns through a lump-sum withdrawal.

Conversely, if you prefer stable monthly income or fear investment risks and overspending, a monthly payout provides long-term cash flow. Unwithdrawn balances continue to earn returns from the labor retirement fund. The new 30-day reconsideration period allows workers who initially choose monthly payments to switch to a lump-sum within 30 days of the first disbursement, offering a second chance to reassess. However, this change can only be made once and cannot be reversed after the deadline.

How Should Different Groups Plan Their Labor Retirement?

For workers far from retirement, regularly log into the Labor Insurance Bureau system to confirm that your employer is legally contributing 6%, and consider starting self-contributions based on income to build retirement capital early. Young workers just entering the workforce can start with 1% to 2% to develop a savings habit while enjoying tax benefits.

Mid-career workers should verify whether past employers missed or under-contributed and gradually increase their self-contribution rate as salaries rise to accelerate retirement savings. Workers nearing retirement should estimate their account balance, evaluate whether monthly or lump-sum withdrawal suits them, and use the 30-day reconsideration period to decide whether to change their withdrawal method after receiving the first payment based on actual financial needs.