Shakai hoken shake-up will open up pensions for some but close door on benefits for others

June 6, 1980, was a Friday. The Social Insurance Agency quietly issued an untitled internal memo called a naikan regarding the eligibility of part-timers in Japan’s shakai hoken health and pension program. Who could have known what chaos, confusion and frustration that single-page document would cause in the coming decades? Let’s get our hands dirty and dig through the details.

All residents of Japan, regardless of nationality, must be enrolled in universal public health care and pension programs, in one of two parallel systems — one for employees, the other for the rest. The one for employees combines both health insurance (kenkō hoken) and pension (kōsei nenkin) into a set called shakai hoken (officially called Employees’ Health & Pension Insurance in English). It’s better than — and incorporates — the other schemes (kokumin kenkō hoken, aka National Health Insurance, and kokumin nenkin, the National Pension). By better, I mean it offers better benefits, as well as requiring employers to put up half the monthly premiums.

What are the better benefits? Shakai hoken includes two-thirds coverage of lost wages due to illness (shōbyō teate) beginning on the fourth day of sick leave and continuing for up to 18 months. Like its kokumin counterpart, shakai hoken covers 70 percent of medical costs. Both old-age and disability pension benefits for those in kōsei nenkin (the pension portion of shakai hoken) are far more generous than for those in kokumin nenkin. (Full disclosure: I receive the disability pension under the kōsei nenkin scheme.)

Naturally, most people prefer shakai hoken to the kokumin schemes. From an employer’s point of view, however, shakai hoken means coughing up half the premiums. Total premiums amount to roughly 20 percent of salaries, so many companies do whatever they can to avoid shelling out another 10 percent of the salary they pay to their workers. But for employees working 40 hours a week (or more), employers have little choice but to cough up.

That’s where the 1980 naikan comes in. Ostensibly written to help part-timers enroll in shakai hoken, this directive achieved precisely the opposite effect.

The relevant laws stipulate no minimum threshold for working hours for shakai hoken enrollment. The naikan, however, states that “regular employees” (tsūjō no shūrōsha) in a particular job, as well as those whose work hours total about three-quarters or more of those of regular employees, should be treated as shakai hoken enrollees. How often have a few innocuous-sounding words wreaked such havoc in a country’s universal health care system?

The Social Insurance Agency (now the Japan Pension Service) used the above minimum as a threshold for cracking down on deadbeat employers who failed to enroll their employees in shakai hoken, but also as a tool to exclude those who fall below that line. This enforcement threshold turned into an eligibility threshold as employers interpreted the naikan as an excuse not to enroll their part-time employees. More than that, many sinister and cynical employers saved bundles by intentionally setting the work hours of new hires at below 30 hours so they could claim that they were ineligible for the scheme.

My union, Tozen, and General Union in Osaka have long fought to win enrollment in shakai hoken for members wishing to join the program. Every time we demand it or get the Japan Pension Service to investigate the eligibility of a member, we run up against the same wall — the 1980 naikan. It was to try to break down that wall that, in 2012, Tozen Union and General Union launched court cases against the Japan Pension Service.

Yancey Co of Tozen Union sued in January 2012 to overturn the agency’s ruling that his hours at language school Berlitz Japan were insufficient for eligibility for shakai hoken. Although the General Union member sued a few months after Yancey, his verdict came down first: Tokyo District Court ruled on March 20, 2015, that the GU member was indeed eligible for shakai hoken, because his actual working hours at assistant language teacher dispatcher Interac went well beyond 30 hours per week despite the “29.5 hours” stipulated in his employment contract.

Recall that the law says nothing about an hour minimum. Nor does the naikan directive specify total hours but rather “about three-quarters of the hours of a regular employee.” There’s no definition of “regular employee,” so the pension office ordinarily and arbitrarily defines it as anyone working 30 hours or more.

General Union’s victory represents a big bite taken out of the naikan, which, again, started its life of evil as nothing more than an internal memo written by a bureaucrat. We at Tozen hope that our case will go even further and challenge the legitimacy of the naikan itself. Our verdict is due in June.

Perhaps making all this a moot point, a new law will go into effect this October. Complicating things is a great way to dissemble and conceal, and legislators spared no effort in this regard when naming this law. You might want to sit down for this. Its name is: Kōteki Nenkin Seido-no Zaisei Kiban Oyobi Saitei Hoshō Kinō-no Kyoka-no Tame-no Kokumin Nenkinhō-to-no Ichibu-wo Kaisei Suru Hōritsu. Did you get that? If that’s too long, you can use the syllabic acronym Nenkin Kinō Kyoka Hō (“Pension Functional Enhancement Law”).

This law enshrines the exclusionary content of the naikan, but will also make eligible a new class of workers who work 20 hours or more, if they happen to meet several conditions.

If you compare the 20 hours of the upcoming new law with the 30 hours that is not in the current law (but was misused and abused as an enrollment threshold), it seems as if our legislators are making the scheme easier to join. The new law has indeed been sold as an expansion of shakai hoken eligibility, known as tekiyō kakudai.

However, since the current law in fact has no work-hour minimum, eligibility will actually shrink (tekiyō shukushō). It gets worse when we look at all the conditions. If you work less than three-quarters of the hours of an ordinary worker you are eligible for shakai hoken if and only if: 1) you work 20 hours or more per week; 2) you expect to be employed for a year or more; 3) you pull in ¥88,000 or more a month; and 4) the company you work for has more than 500 employees who were eligible before the change (i.e., under the naikan).

The last condition says it all. Few workers work for such large companies. The Ministry of Health, Labor and Welfare’s website notes that it expects just 250,000 people to be newly eligible under the October law. Note that the ministry uses the naikan as its basis for eligibility, something we are challenging in court.

One good thing about the new pension law is that the years of enrollment required for eligibility for old-age pension benefits will drop from 25 years to 10 years, although it will be pro-rated (so if you’ve worked, for example, 12.5 years, you would be entitled to half the regular pension premium).

So whereas eligibility will technically shrink, in practice it will increase for a tiny minority while pension benefits will be in reach for more people, particularly foreign residents who have difficulty accruing 25 years.

Whatever your opinion, don’t let the complexity of the laws and rules obscure what is really going on: Eligibility will shrink not expand, but more will get old-age pensions. Good or bad, the important thing is to know the details.

Louis Carlet, chief finance officer of Tozen Union, writes this month’s Labor Pains on behalf of Hifumi Okunuki, who is taking a well-deserved break. Labor Pains usually appears in print on the fourth Monday Community Page of the month.