Did You Know About Dormant Insurance Funds for Foreign Workers?

Have you ever heard that some of the insurance contributions made by foreign workers go unclaimed and end up as dormant insurance funds? Dormant insurance funds refer to the insurance payments that foreign workers do not collect after returning to their home countries or changing their visa status. As of now, over 30 billion won has accumulated as dormant insurance funds, with an annual increase of about 5 billion won.

What’s Causing the Surge in Dormant Insurance Funds?

This rise in dormant funds is largely attributed to the increase in undocumented foreign workers. Let’s explore why this issue is so prevalent.

The Connection Between Employment Permit System (E-9) and Dormant Insurance Funds

The government has identified the influx of foreign workers entering through the Employment Permit System (E-9 visa) as one of the reasons for the growing dormant insurance funds. This system allows foreigners to work legally in South Korea. However, many who enter through this program end up becoming undocumented workers due to job insecurity, low wages, and poor working conditions. When these workers transition to illegal status, they often lose the ability to claim their insurance funds, resulting in contributions that remain unclaimed and eventually turn into dormant insurance funds.

Foreign workers can claim their insurance payments when their employment contract ends, their visa status changes, or they return to their home country. However, many workers either forget this option or are unaware of it by the time they leave. If unclaimed for over three years, these funds are classified as dormant and transferred from private insurers to the Human Resources Development Service of Korea.

Why Aren’t Foreign Workers Claiming Their Dormant Insurance Funds?

There are several reasons contributing to the high accumulation of dormant insurance funds.

The first reason is that many foreign workers are often unfamiliar with the process of claiming their insurance. It’s not uncommon for them to forget they have insurance or not receive clear guidance on how to claim it before they leave. This issue is particularly severe among undocumented workers, who lose their eligibility to claim these funds, resulting in more dormant funds.

Another factor is the significant increase in undocumented foreign workers. As of 2023, the number has surpassed 420,000, up from about 200,000 in 2014. Many of these undocumented workers are unskilled laborers who entered through the Employment Permit System (E-9). Those in unskilled positions often face unstable work environments and low wages, making it more likely they cannot fulfill their contracts and instead turn undocumented. Consequently, their insurance contributions remain unclaimed and become dormant.

Government Efforts to Address the Issue

The South Korean government is taking various steps to address the issue of dormant insurance funds. They provide guidance on how to claim these funds through phone support, in-person visits, and the creation of informational materials. Moreover, they have introduced an automatic refund system, allowing foreign workers to receive their insurance reimbursements directly into their bank accounts when they leave the country.

This automatic refund system acts as a significant improvement, enabling foreign workers to reclaim their insurance without additional procedures. Despite these efforts, the actual refund rate remains low. Many foreign workers still struggle to reclaim their contributions.

The challenges include insufficient government outreach, as well as the difficulty in contacting undocumented workers. As a result, the refund rate has not significantly improved.

This article reflects the current situation and acknowledges that government policies may change over time. It provides general information and does not constitute legal advice. For further inquiries or support, feel free to visit the 1:1 Consultation Forum.