One of the large sums of money that helps you prepare for your retirement is your retirement allowance. These days, there are many people who want to get their severance pay settled in the middle due to difficult times. In order to get a house, there may be various reasons such as children’s marriage and medical expenses, but the first thing to do is to check if it falls under the reason for interim settlement of severance pay.
interim settlement of severance pay
In this post, we will learn about how to receive interim severance pay settlement, reasons, and the shortcomings of interim settlement of documents. If you’re about to make a mid-term settlement, please read it!
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Five reasons for interim settlement of severance pay
Where a person who is a homeless person purchases a house in his/her name and pays a lease deposit or deposit for the purpose of housing;
In the case of paying medical expenses for diseases or injuries that require medical treatment for more than 6 months (if the patient is himself, his/her spouse, or his/her dependents)
Where an employee has received a decision to declare bankruptcy and commence personal rehabilitation procedures within five years from the date of application for interim settlement of severance pay;
Where the employer decides to work for at least three months by reducing wages or changing the prescribed working hours on the condition that the retirement age is extended or guaranteed (ex: wage peak system)
In the case of damage caused by natural disasters, etc. or social disasters such as infectious diseases such as COVID-19, the reasons and requirements determined and publicly notified by the Minister of Employment and Labor;
How to receive interim retirement allowance
The interim settlement of severance pay can be applied to the employer (company) if the employee falls under the reason for interim settlement, but the employer may not accept the application for interim settlement, so please check in advance.(Can be rejected due to the company’s circumstances)
Interim retirement settlement documents and application timing
The retirement benefit system > interim settlement of severance pay was prepared based on the data as of April 15, 2021.
When purchasing a house
Application time
Within one month after the registration of ownership transfer from the date of signing the housing sales contract
documents to hand
a copy of one’s residential registration
a copy of the current residence register
a certificate of property taxation
a real estate contract
A certified copy of the registered building after registration
Where medical expenses are required
Application time
At the time of the application for interim settlement, he/she is undergoing medical treatment due to illness or injury, etc
Where medical treatment is completed, within one month from the date of completion of medical treatment
documents to hand
a family relationship certificate
a doctor’s note and note of opinion
Health Insurance Corporation’s Checkout for Long-Term Care
Documents that can prove expenses spent on medical care for at least six months
Wage peak system wages decrease
Application time
As workers whose wages decrease due to the implementation of the wage peak system, application is made on the day when the wage peak system is implemented in principle
documents to hand
Proof documents confirming employment rules and wage peak systems
a labor contract
a salary statement
In case of paying the deposit or deposit
Application time
One month after the balance payment date from the date of signing the housing lease contract
documents to hand
a copy of one’s residential registration
a copy of the current residence register
a certificate of property taxation
a copy of the charter and lease agreement
Receipt of lease deposit payment
In case of damage caused by a natural disaster
documents to hand
a family relationship certificate
Confirmation of damage, natural disaster damage report
Confirmation of hospitalization for more than 15 days
Damage investigation data of administrative agencies
In the case of a natural disaster, you can apply within three months, and if the damage is not resolved smoothly, you can apply even after three months
Where bankruptcy is declared and individual rehabilitation procedures are received;
Application time
Where bankruptcy is declared within five years after calculating backwards from the date of application (the bankruptcy must be in progress at the time of application)
Where bankruptcy is declared within five years after calculating backwards from the date of application (the decision to commence individual rehabilitation procedures at the time of application must be in progress)
documents to hand
The court’s declaration of bankruptcy, documents that can confirm bankruptcy
Decision of commencement of rehabilitation procedure
Certificate of confirmation of individual rehabilitation procedure reimbursement
Disadvantages of interim settlement of severance pay
Is there any disadvantage of receiving the interim settlement of severance pay? I’m worried. Let’s look at two typical disadvantages of interim settlement of severance pay.
What about interim tax?Retirement income tax
Retirement income tax calculator
The thing to worry about when receiving the interim settlement of severance pay is the “retirement income tax.” Retirement income tax is lower as the working period increases. However, if you settle your severance pay in the middle of your work life, the working period will be reset, resulting in a very high retirement income tax.
But there’s another solution. It is a way to apply for a special retirement income settlement. If you submit a receipt for collection of retirement income received during the interim settlement of severance pay, the company calculates the working period again from the date of employment.
We will learn more about retirement income settlement special cases next time.
The total severance pay will be reduced
If you receive an interim settlement of severance pay, the total retirement allowance will be reduced. That’s because of the ‘retirement calculation formula’.
Retirement allowance = Average wage per day X 30 days X (number of days of work 36 365)
Average wage per day = {total wage for 3 months before retirement + annual bonus X 3/12 + annual allowance X 3/12} 3 Number of working days for 3 months
Since the formula for calculating severance pay is based on three months before retirement, if you receive an interim settlement in advance, there is a big difference from the total severance pay you can receive when you retire. So, if it’s not unavoidable, I don’t recommend interim settlement.
If you have more questions about severance pay, please refer to the link below for 100 questions and answers on the interim settlement of severance pay.
> Interim retirement allowance 100 questions and 100 answers
In today’s post, we talked about how to receive interim retirement payments, reasons, and shortcomings. The interim settlement of severance pay is not recommended unless it is unavoidable. Depending on the situation, it would be nice to receive a large sum of money, but please keep in mind that the company does not always provide interim settlement just because you apply.