Labor Insurance Fund 'not in a crunch'

The Labor Insurance Fund was neither caught in financial straits nor suffered a liquidity crunch, despite selling NT$30 billion worth of bonds to the Labor Retirement Pension Fund, a top labor official said yesterday. Minister Jennifer Wang of the Council of Labor Affairs (CLA) made the remarks during the Health, Environment and Labor Committee session of the Legislative Yuan.
At the session, some lawmakers asked Wang to explain the Labor Insurance Fund's recent sale of NT$30 billion in bonds to the Labor Retirement Pension Fund, as reported by local newspapers.
Newspapers reported that since the beginning of July, the Labor Insurance Bureau under the CLA has continuously unloaded part of its bond holdings to the Labor Retirement Pension Fund to boost its cash positions to support payment of elderly pension to retired insured workers.

In response, Lawmaker Huang Yi-chiao of the ruling Kuomintang directly asked Wang whether the Labor Insurance Fund will go bankrupt. Wang replied that "It's impossible for any government to allow the labor insurance system to go bankrupt." Wang stressed that the bond sales is a kind of normal fund management by the Labor Insurance Fund in accordance with the rules governing the operation of the Fund. Under the rules, the Fund is authorized to make investment in the local stock and bond markets.

Meanwhile, Wang also told lawmakers that the stock holdings recorded by the Labor Insurance Fund declined by NT$20.5 billion in the first eight months of the year, compared with the same period of last year. Wang cited statistics compiled by the Bureau of Labor Insurance as indicating that the Fund's domestic equity holdings fell NT$15 billion for the period, while its international stock holdings declined NT$5.5 billion, Wang said.

Wang said the filing for bankruptcy by U.S. investment bank Lehman Brothers caused the Labor Insurance Fund to suffer a US$1.2 million loss and the Labor Pension Fund a US$340,000 loss.
In response, Wang said that if all eligible retired labors were to ask for their money from the fund at one time, the fund would fall short by NT$900 billion in making the payments.

However, since the passage in July of the Labor Insurance Annuity scheme, under which retired laborers can choose between receiving their money in one lump sum or in monthly payments, the number of laborers asking for a lump sum payment has gradually declined, Wang said. In July, 40,000 retired laborers received their lump sum payment from the fund, while the number dropped to 28,000 in August, with the amount totaling NT$35 billion, Wang said, adding that the same figures are expected for September.

Noting that the Labor Insurance Fund currently has assets of NT$200 billion, with NT$40 billion in cash holdings, Wang said that making payments to retired laborers in September and thereafter shouldn't pose a problem.