When an employer offers a choice between a DB (defined benefit) and a DC (defined contribution) retirement pension, the first question is which pays more. Korea’s Employee Retirement Benefit Security Act fixes the two from opposite ends. DB fixes what you get: the lump sum worked out at the leaving date must be at least 30 days’ average wage for each year of service (Art. 15). DC fixes what goes in: the employer must pay at least 1/12 of annual wages into your account each year (Art. 20). So DB depends on your final pay, DC on investment returns. Enter today’s monthly wage, years of service, pay growth and a return to see both side by side.
1. DB: at least 30 days’ average wage × years of service (Art. 15) — grows with your final pay.
2. DC: the employer pays at least 1/12 of annual wages each year; you choose the investments (Arts. 20–21).
3. Our arithmetic: if returns beat pay growth, DC ends up larger; if not, DB — equal rates give equal sums.
Calculator
Updates as you type. Our simplification: DB = final monthly wage × years (treating the final monthly wage as 30 days’ average wage); DC = one month’s pay paid in at each year end and compounded at the return you enter. Fees, tax and mid-career changes are ignored.
The provisions
| Type | What the source says | Worth noting (ours) |
|---|---|---|
| Art. 2 items 8–9 | A DB plan is one where the level of benefit is set in advance; a DC plan one where the employer’s contribution level is set in advance | Fixed payout vs fixed payment in |
| Art. 8(1) | Severance pay must be at least 30 days’ average wage per year of continuous service | The same floor as DB |
| Art. 15 | The DB lump sum, worked out at the leaving date, must be at least 30 days’ average wage per year of service | “At least” — plan rules may pay more |
| Art. 17(1)–(3) | DB pension for those 55 or over with 10 years’ membership (paid over 5 years or more), otherwise a lump sum; paid within 14 days; any shortfall in reserves paid by the employer within 14 days | The employer tops up |
| Art. 20(1)–(3) | DC employers pay at least 1/12 of annual wages in cash; members may add their own contributions; paid at least once a year, with late interest if late | The calculator uses exactly 1/12, once at year end |
| Art. 21(1)–(2) | DC members choose how reserves are invested and may change at least every half-year; providers offer three or more options with different risk and return | Returns are the member’s |
The real difference is who carries the investment result. Under DB the payout is fixed, so the employer must make up any shortfall (Art. 17(3)); under DC only the payment in is fixed, so gains and losses stay in your account (our gloss).
Three sums — our example
Monthly wage 3 million won today, 20 more years, pay rising 3% a year; only the DC return changes. The final year’s monthly wage is 5,260,518 won, so the DB lump sum is 5,260,518 × 20 = 105,210,363 won. Employer contributions into DC over the 20 years total 80,611,123 won.
| DC return a year (our example) | DC balance | Against the DB lump sum (our arithmetic) |
|---|---|---|
| 2% (below pay growth) | 96,049,151 won | DB ahead by 9,161,212 won |
| 3% (equal to pay growth) | 105,210,363 won | The same |
| 4% (above pay growth) | 115,503,572 won | DC ahead by 10,293,209 won |
Equal rates give exactly equal sums because each year’s month of pay, grown at the same rate, is worth the final month’s pay at retirement, stacked once per year of service (our arithmetic). Real DB amounts use average wage, which can differ from the final monthly wage; see average wage calculator.
What the calculator leaves out
- Fees and tax — DC management fees and retirement income tax on payout aren’t included.
- “At least” — Arts. 15 and 20 set floors only; if your plan rules pay or contribute more, they govern.
- Your own top-ups — extra contributions under Art. 20(2) aren’t included.
- Falling pay — enter negative pay growth to see the DB figure shrink.
Late DC contributions and their interest are in DC employer contribution calculator; the general guide is DB vs DC retirement pensions.
Checklist
- ☐ Plan type (DB, DC or both) and levels in your plan rules
- ☐ How much your pay is likely to rise
- ☐ Under DC, review investments every half-year (Art. 21)
- ☐ On leaving, payment within 14 days and IRP transfer (Arts. 17, 20)
Questions that remain
Can I switch from DB to DC?
Changing plans is outside the articles we read (Arts. 2, 8, 15, 17, 20, 21). Check your plan rules and HR.
With negative returns, can DC end up below what was paid in?
The calculator shows that if you enter a negative return. Art. 21 leaves investment to the member, so losses stay in the account (our gloss). Whether a capital-guaranteed option is offered is in your provider’s guidance.
Sources
- Korean law database (law.go.kr) — Employee Retirement Benefit Security Act Arts. 2, 8, 15, 17, 20, 21 — source (current text, effective 18 September 2026, Act No. 21475; checked 2 November 2026). DB and DC definitions, 30 days’ average wage, DB benefit level, DB eligibility, 14-day payment and shortfall, DC 1/12 contribution, member top-ups, yearly payment, investment choice.
- Not read. The Enforcement Decree (late-interest rate, IRP exceptions), plan-change procedure, the average-wage definition (Labor Standards Act Art. 2).
- What we added. The “worth noting” column and the Korean everyday gloss.
Where to check further
- Your plan rules — benefit and contribution levels, payment dates.
- Your pension provider — investment options, fees, balances.
Written on 2 November 2026. The content is from the source; the glosses are ours.
