1. 「Selective 401K」
401K achieves both employees’ successful retirement and company’s cost reduction

2. What is a 401K　?
It’s a system that a company creates employees’ successful retirement while a company cuts its cost.
What is a 401K　 It is the system which achieves both the introduction of employee’s benefits after retirement and a company’s cost reduction at the same time.

3. Japanese public pension will never increase but decrease…
According to Ministry of Health, Labour and Welfare
■sample case
A family with a husband whose income is 360,000yen for 40 years of work life with full-time housewife
2014
2023
Average income
360kyen
Public Pension
227k yen
（about63％）
180k yen
（about 50％）
You need to understand about Japanese public pension system before you understand why it’s so important for Japanese to build their assets for their retirement.
Japan is the world's fastest aging society with the low birthrate and longer life-spans.
As shown in the presentation data, you can easily see that the amount of the pension which people can receive in the future will decrease.
Moreover, with declining incomes, and lower expected returns on pension funds, the financial condition of the pension system is expected to worsen, and some suggest that maintenance of the system may become very difficult.
Now you must have understood why it is very important for Japanese to save certain amount of money for their retirement.

4. Current status of Corporate Pension
employee pension
defined-benefit pension
approved retirement annuity
401K
4.15 million
8 million
5 million
2012.3　abolished
Corporate Pension
Vocational Pension
National Pension Fund
(voluntarily)
Employee Pension
Mutual Pension
National Pension
1st insured person
3rd insured person
2nd insured person
Self employed
Workers
Government Workers
Dependent of 2nd insured person
decreasing
increasing
Number of company adopting 401(k)
increasing
5 million people
Increasing by companies with 10,000 people every month
18,752
14,628
There are many companies which introduce their pension system by their own. 1 in 2 employees join a certain kind of corporate pension system.
There are 2 types of corporate pension.
1 is defined-benefit pension which promises the amount of the pension employees can receive in the future.
The other is Defined Contribution Pension Plan which only guarantees the current amount of contribution.
Companies in Japan thinks that it is kind of risky for a company to pay promised amount of pension (defined-benefit pension) in the future.
The number of the company which adopts Defined Contribution Pension Plan is increasing and the number of people who joined the plan achieved 5 million which means 1 in 7 employees in Japan.
As shown in the data, that it is likely that companies in Japan like to support their employee’s successful retirement but do not want to take a risk in the future.
10,334
4,350
But Why?
End of 2004
End of 2007
end of 2010
Jun. 2014

5. However it does not mean “ company’s cost reduction”.
Typical 401K in Japan
Contribution on 401(k)
Contribution on 401(k)
topping up
topping up
wage
wage
Mr. A 3 years of service
A company pays 5,000 yen every month as contribution of 401(k) for Mr.A’s pension in the future
Mr. B Manager
His contribution to the company is pretty high. So a company pays 10,000 yen every month as contribution of 401(k) for Mr.B’s pension in the future
Typical 401k in Japan is generally the one the company set the amount of the contribution based on how much an employee contributes to a company.
It is pretty good for employees because a company supports to build his assets. However it does not mean “ company’s cost reduction”.
However it does not mean “ company’s cost reduction”.

6. What’s the meaning of “Selective”
Change the wage system
set the maximum amount of contribuiton for 401K and “selective amount “
“Now” to receive
Selective amount
55,000 yen
“Will” receive in the future
Basic Wage
310,000 yen
New Basic wage
255,000 yen
What’s “selective” 401(k)?? Why “selective”?
As shown in the presentation data, a company changed a wage system and they divide basic wage into new basic wage and selective amount. An employee decides how much selective amount to choose and whether he receives “now” or “will” receive in the future.
55,000 yen is the maximum amount of “Selective amount “. Each employee can decide the amount of the contribution between 3,000 yen and 55,000 yen at his own discretion. Of course he can choose not to contribute at all but receive the same amount of money he used to get.
So this is the system which respect employee’s independence such as he can select the way of receiving his wage by his own discretion.
The amount of the wage is not changed

7. Advantage of employee when he/she “selects” DCP
Social Security
TAX
take-home pay
Defined Contribution Pension Plan
personal saving
Select
I will do it
I won’t do it
Elective salary deferrals are excluded from the employee’s taxable and social security deductable income.
If an employee selects to contribute, he gets some advantages.
Before adopting 401(k), tax and social security will be deducted from the total amount of wage. And the remain is take home pay.
You invest from this take-home pay.
After adopting 401k, the contribution will not be included as wages subject to tax and social security as it is stipulated Japanese laws.
And a great advantage is here.
Great advantage is here!

8. Employee’s Advantage I Reduction of social security expense
Employee decide how much to contribute in a monthly wage
■　Contribution amount is not taken as “WAGE” and is not subject to tax and social security.
For example : An employee Mr.A
- Basic wage = 310,000 yen. - Commutation allowance = 5,000 yen.
Total monthly wage =315,000 yen - No dependents years single man
Now
After adoption of 401(k)
Wage ?
310,000
Commutation
Allowance
5,000
Total
315,000
Employment Insurance
1,575
Employee Pension
27,958
Health Insurance
15,952
Income Tax
7,070
Residence Tax
18,500
Total deduction
71,055
Take Home
243,945
Wage ?
310,000
Commutation
Allowance
5,000
Total
315,000
401(k) Contribution
30,000
Employment Insurance
1,425
Employee Pension
24,464
Health Insurance
13,958
Income Tax
6,210
Residence Tax
18,500
Total deduction
94,557
Take Home
220,443
This is not included as wages subject to tax and social security.
30,000 yen of monthly contribution
There are 2 advantages for employees
One is the reduction of the tax and social security expenses.
As explained on the previous page, the wage of the contribution is not included as wages subject to tax and social security.
This shows in the above right of the current page.
In this case, a monthly contribution is 30,000 yen. But the decrease of the take home pay is 24,000 yen.
So the balance is 6,000 yen and this is the benefit.
You will get more advantage as your inhabitant tax will be decreased in the next year.
The rate of the social insurances are based on the rate in October 2014 in Tokyo.
Even an employee contribute 30,000 yen every month, his take home amount decreases only 24,000.
Which means… this balance of 6,000 yen is the advantage for the employee himself.

9. Employee’s Advantage II no tax on the investment profit
It is not taxable on the investment profit of 401(k) assets
■　monthly contribution→This is not taken as current “income” → tax-deferred advantages
About 15.9 million yen
About 18.9 million yen
Taxed on contribution and investment profit
No tax on contribution and investment profit
Regular investment
Balance is 3 million yen
401K
Deferred advantage ＋
Reduction of social insurance fee
= 5million yen
The another advantage is that it is not taxable on the investment profit of 401(k) assets.
The investment profit of 401k is not taxable and have tax-deferred advantages while regular investments are made up of after tax contributions and have no tax-deferred advantages. If you had stocks, bond, CD, and mutual fund, bank savings - type investments, only the yearly earnings (i.e. dividend or interest) and any increase value of these investments are taxed (tax rate is 20%).
The purpose of 401(k) is “asset building” in a long term and “tax-free” is a great advantage for employees.
The graphs above are based on a model who is 30 years old single man living in Tokyo with 30,000 yen of monthly contribution for 30 years 3 % of earnings on contributions. The tax rate for the regular investment on the above right graph is 20%.
No taxes owing on earnings! The longer you make earnings by 401k, the more advantages you will get.
Employees get great advantages with these nontaxable contributions & earnings

10. Company’s Advantage ~ The reduction of Social Security Expense ~
Let’s see how much social security expense a company can reduce
For example : An employee Mr.A
- Basic wage = 310,000 yen. - Commutation allowance = 5,000 yen.
Total monthly wage =315,000 yen - No dependents years single man
Current company’s expense
Company’s expense After adoption of 401(k)
Labor Insurance
Industrial injury insurance
¥855
Employment insurance
¥2,423
Social Insurance
Employee pension
¥24,464
Health insurance
¥13,958
Total
¥41,700
labor insurance
industrial injury insurance
¥945
employment insurance
¥2,678
Social Insurance
employee pension
¥27,958
Health insurance
¥15,952
Total
¥47,533
30,000 yen of monthly contribution
Now focus on advantages of the company when adopting Defined Contribution Pension (DCP)system.
One advantage is the improvement of your company’s welfare program.
It is so attractive for employees that it prevents them from leaving a company or is effective for recruitment.
The 2nd advantage is the reduction of the social security expense.
In Japan, fee for the social security is in equal shares by employer and employed.
So a company also get advantage as the expense of social security reduces.
In the case of this current presentation page, a company can reduce 5,800 yen per employee.
You may think of this amount as very small. But to think of the term and number of the employees, you will know how big amount of money a company can save.
For example, if 50 of the same salary of employees adopted 401(k), a company can save 3.48million yen of money.
The rate of the social insurances are based on the rate in October 2014 in Tokyo.
The amount of a company’s social security expense which a company can reduce is about 5,800 yen

11. Other cost paid by a company
Initial cost and administrative expense is required
■This cost is within the reduced amount of social security fee due to the business with operational management company
◆Management and revision of pension regulation ◆information service for employees ◆Service website “401K WEB”◆Scheduling management and support◆Training for new enrollment　◆Training for the employee in charge
More back-office jobs on Administration Department / Finance Department
■　The jobs became much easier by information service via website
What kind of things are required after introduction of 401k?
1st to mention is its cost.
You have to pay for the cost to the organization for 401k which manages the record, provides information, and manage assets.
However, in most of the cases a company can cover these costs by reduced social security fee if the company has about 10 or more employees.
2nd to mention is operational job for 401k
But do not worry. You can do most of the operation in website.
◆back office jobs such as the procedure for enrollment, loss, and break
◆management of contributions and its payment

12. Schedule
employees
Pay contribution from his/her wage
Decision of enrollment and a contribution amount
briefing
Decision to adopt 401(k)
Advice on the adoption of 401(k)
Prepare work regulations and pension regulations
4 to 5 months are required before the service start after the decision of its adoption.
After adopted,
We support your operation of the system through “401k WEB”.
Support the 401(k)’s smooth operation. After adoption, we will support the management of “pension regulations”, simulation of 401k plans, and trainings.
Please see the schedule above
You need to get a permission from a government to adopt 401(k).
About 3 to 4 months are required before the service start.
The most important thing is the trainings after start of the service.
401k Co.Ltd., offers comprehensive support through “trainings” and “401k WEB” from adoption to daily operation.
Selective 401k is the new style of wage which supports creating employee’s assets for his/her after retirement life and company’s cost reduction.
Permit applications
Registration application
operational administrative organization
Asset management companyies and trust banks
Ministry of Health, Labour and Welfare
Select a plan
Information service
Coordinate operations
Organize balance of assets
Adjudication of wages
Organize employees’ orders