Increasing Role of Corporate Pension Plans and Movement toward their Improvement
In 1986, the amendments of the Employees’ Pension Insurance Act introduced the Basic Pension. During the discussion of the amendments, the roles of public pensions and private pensions were being recognized. In particular, it was recognized that the role of public pensions was to provide basic income security to aged people and the role of corporate pensions was to satisfy individual needs for comfortable living of diversified lifestyles.
It was stated in the “Fundamental Policies for Aging Population Society” approved by the Cabinet in June 1986 to improve the corporate pension system.
Accordingly, in order to promote and develop the corporate pension plans, more deregulated rules on both plan designs and funding requirements were put on the agenda, that would accept wider needs of companies and their employees.
In April 1986, a study group on corporate pension, chaired by Masaomi Yamashita, Managing Director of the Environmental Sanitation Business Finance Corporation, was established as a private advisory body of the pension chief of the Ministry of Health and Welfare and it began to discuss on Employees’ Pension Funds system.
Introduction of Certified Pension Actuary System
The study group reported in the interim report “the responsibility of pension-related actuarial services and their providers has become more important along with the maturing of pension plans”. Furthermore, it pointed out “pension-related actuarial service providers should play an important role for the prevalence and appropriate management of Employees’ Pension Funds as they advise the benefit design, planning of funding schedule, and evaluation of funding position of the Employees’ Pension Funds from an objective point of view based on their advanced expertise and experience. Thus it is necessary to have active discussions toward the implementation of the Certified Pension Actuary System and to obtain the understanding and consent from the interested parties.
Also, two important recommendations about the Certified Pension Actuary System were published, where the ideas above were developed more systematically and concretely. One was published in April 1986 by the study group on actuarial matters of corporate pensions organized by the Pension Fund Association and chaired by Masamichi Funago, President of the National Association of Labor Banks, which stated “There is an increasing demand for more flexible regulations on plan management which would promote the diversification of corporate pension plans and their self-sustaining development. The establishment of a responsible pension management structure should serve as the base for them and it is necessary to introduce a certification system for those who would be licensed to provide actuarial services from a fair and neutral point of view with deep expertise and experiences and are responsible for the financial management of corporate pension plans.
Another one was made in August 1987 by a study group on pension-related actuaries which was also organized by the Pension Fund Association and chaired by Masamichi Funago. It recommended “It is necessary to sets forth codes of ethics or conducts and some guidelines on actuarial work”.
Following these reports, the Ministry of Health and Welfare began to draft the bill for amending related laws, which was submitted to the Diet after consultation with related ministries and subsequent approval by Cabinet. As a result, it was approved by both Houses of the Diet and came into force in May 1988. The purpose of the amendments was to improve pension benefits and establish the conditions for further promotion of Employees’ Pension Funds. This was the first major amendment since the establishment of the Employees’ Pension Fund system. As one of the amendments to accomplish these purposes, Article 176-2 was newly added to Employees’ Pension Insurance Act, and under the Article, the Certified Pension Actuary System was implemented.
This was the realization of the idea that the structure of pension-related actuarial services should be strengthened and expanded by developing pension-related actuarial professionals in order to ensure the development of Employees’ Pension Fund under sound financial conditions. Moreover, it should be stressed that the amendment had promoted the diversification and deregulation of Employees’ Pension Funds.
On September 1, 1988, 102 pension actuaries were certified as the first Certified Pension Actuaries, and it was started that a document which related to actuarial works submitted from Employees’ Pension Funds or the Pension Fund Association to the Minister of Health and Welfare were to be verified by Certified Pension Actuaries.
In implementing the National Pension Fund system in April of 1991, it was started that the Certified Pension Actuary System was also applied to National Pension Funds and National Pension Fund Association with an aim to ensure that they were well-funded under the appropriate actuarial principles by which their benefits were secured.
Establishment of the Japanese Society of Certified Pension Actuaries (JSCPA) as an Unincorporated Organization
When the Certified Pension Actuary System started as a public certification on September 1, 1988, there was no objection among certified pension actuaries to the establishment of their association as a professional organization. Then, a preparatory group for the establishment of such an association was set up soon supported by related industries. The discussions made by the preparatory group covered not only the preparation for the establishment of such an association but also a wide range of issues including its expected role and how it should be characterized, in particular the relation with the Institute of Actuaries of Japan. After such discussions, it was accepted by the related parties that such an association would start as an unincorporated organization. Finally, this led to the establishment of the JSCPA on April 4, 1989, only six months after the preparatory group was set up.
Since the establishment of the JSCPA, it had continued steady activities such as making proposals to the Ministry of Health and Welfare, holding its 5th anniversary commemorative symposium, conducting seminars on a regular basis to improve the knowledge and skills of members, establishing standards of practice, and publishing journals to share information among members and public announcements.
Incorporation of the Japanese Society of Certified Pension Actuaries as a non-profit juridical person
With the introduction of plan specific exempted premium rates and the ongoing financial deregulation, it became more and more necessary to ensure the independence and fairness of pension-related actuarial works. In response to this, the incorporation of the JSCPA was considered, but was ultimately not agreed among related parties.
Nine years passed after the establishment of the JSCPA and, the activities of the JSCPA had widely been recognized by the related parties such as Ministry of Health and Welfare and Employees’ Pension Funds. In addition, further deregulation of Employees’ Pension Funds also led to the introduction of the Appointed Certified Pension Actuary System. Driven by the increased presence of the JSCPA and the increased momentum for its incorporation, followed by the establishment of an organizing committee in December 1997 and its vigorous preparations, the establishment of the JSCPA as an incorporated association was finally approved on May 1, 1998.
Reorganization as a Public Interest Incorporated Association
In association with the enforcement of three laws related to the reform of public interest incorporations in December 2008, the JSCPA was required to be transferred to either a public interest incorporated association or a general incorporated association within five years of the transitional period.
The JSCPA had worked on activities that contributed to the public interest, including the sound development of corporate pension plans. To further enhance these activities, a transition to a public interest incorporated association was deliberated as appropriate, and its direction was resolved at the Ordinary General Meeting in May 2011.
The JSCPA made detailed discussions toward the transition to a public interest incorporated association, and submitted the application for the transition. The JSCPA obtained the approval from the Prime Minister in March 2013. As a result, the JSCPA launched its next journey as a public interest incorporated association on April 1, 2013.
