More Fun with Pensions

How's this for a scenario: A company is in financial trouble. It has cash-flow problems and has difficulty coming up with the money to pay expenses every month. One expense is of course the monthly pension premiums it pays for its workers, premiums based on the employee's monthly salary. The salary, and thus the premium, is of course what determines how much the employee will get in pension benefits once they retire.

The Japanese Social Insurance
Agency Open for Business

Things look grim, and as it turns out, one way to cut expenses is to lie to the social insurance agency - tell them the monthly salary of the workers are a lot lower than they really are and you can get away with paying just the minimal premium. Of course, years down the road those employees are going to get a very nasty surprise when their retirement payouts are only a fraction of what they thought they'd get. But that is then, this is now and it's a clever way to cut costs. All in all, just another example of companies in trouble resorting to fraud or other crime in an effort to save themselves.

But here's the wrinkle: Hundreds of companies in trouble were told to do this by a social security agency official. Why would he do that (it's only one official at the moment but the scandal is still very young)? If a company defaults on the pension payments, that impacts the payment rate statistics for the agency, making the pension system look like it's in trouble and makes the official look bad. If the company declares a fraudulently low income it can continue to pay, and that makes the agency statistics look much better while avoiding economic problems for the company. Everybody wins - well, everybody except for the workers cheated out of their pensions, but who cares about them anyhow, right?