we've just launched a new 3-year savings plan for employees of small and medium-sized enterprises. you can contribute from $100,000 to $500,000 per month and the company will match 20%. check out the terms and estimated maturity.
table of contents
- what is the SME Employee Savings Plan?
- eligibility and conditions
- three-year savings plan benefits
- expected maturity details
- how to enroll in 4 steps
- frequently asked questions
if you work for a small business, we've got news for you. we've added a new three-year product to the Small Business Savings Allowance. previously, only the 5-year plan was available, but with the introduction of the 3-year plan, you can choose the plan that fits your situation.
the SME Employee Savings Allowance is a program that allows employees to save a certain amount of money each month and their employer will match a portion of their contributions. it's popular among SME workers because it gives them a much better deal than simply saving on their own.
who is eligible for the Small Business Employee Savings Plan?
anyone who works for a small business can join, regardless of their employment status. full-time employees are eligible, as well as contractors and short-term workers. there's no age limit or length of service requirement, so even new hires can join right away.
however, not all businesses are eligible: those in the entertainment or meandering industries are restricted from joining. You must also meet the small business criteria set by the Basic Act on Small and Medium Enterprises.
sMEs are divided into medium-sized enterprises, small enterprises, and micro-enterprises. all three types must have total assets of 500 billion won or less. The average sales threshold varies depending on the type of business. medium enterprises must have an average revenue of between KRW 40 billion and KRW 150 billion, while microenterprises and small businesses must be in the KRW 1 billion to KRW 12 billion range.
if you're not sure if your company qualifies as a small business, contact your human resources or business support team for guidance.
what are the benefits of the 3-Year Thrift Savings Plan?
the great thing about the SME employee savings plan is that you don't have to save alone, your company does. employees can contribute any amount from $100,000 to $500,000 per month, and their company will match 20 percent of their contributions.
for example, if you contribute $500,000 per month, your company will contribute an additional $100,000. add to that the bank interest of up to 4.5 percent per year, and you'll have about 23 million won after three years. this is the combination of your own savings of 18 million won, the company's contribution of 3.6 million won, and the bank's interest.
you can choose how much you want to contribute, from 100,000 won to 100,000 won per month, depending on your financial situation. it's important to save steadily but not too much.
estimated maturity based on monthly payments
let's take a closer look at the estimated maturity of the 3-year and 5-year plans, so you can choose the appropriate option for your savings plan.
3-year savings plan maturity
if you pay $100,000 per month, you can expect to save $3.6 million in principal and $72,000 in company contributions, for a total of $4.6 million. if you pay 200,000 won per month, you will receive 7.2 million won in principal and 1.44 million won in company support, totaling 919,000 won.
if you pay 300,000 won per month, you'll pay 1,080,000 won in principal and 216,000 won in company subsidies, for a total of 1,379,000 won. if you pay 400,000 won per month, you can expect to pay 1,440,000 won in principal and 288,000 won in company subsidies, for a total of 1,838,000 won.
as mentioned earlier, if you continue to pay 500,000 won per month, you can expect to receive 18 million won in principal, 3.6 million won in company support, and about 22.98 million won in bank interest.
5-year savings plan
if you can afford to save for a longer period of time than three years, the five-year plan is worth considering. the 5-year plan allows you to save for a longer period of time, so the maturity amount is higher.
if you pay 100,000 won per month, you can receive about 796,000 won in principal and 1.2 million won in company support. if you pay 200,000 won per month, you can save 12 million won in principal and 2.4 million won in company support, which is about 15.92 million won.
if you pay 300,000 won per month, you can expect 2,388 million won in principal and 3.6 million won in company support, and if you pay 400,000 won per month, you can expect 3,184 million won in principal and 4.8 million won in company support.
if you pay 500,000 won per month for five years, you'll have 30 million won in principal, 6 million won in company support, and about 39.8 million won in bank interest. that's nearly 40 million won in savings.
please note that the maturity amount may vary depending on the preferential interest rate.
how to enroll in the SME Savings Plan
to enroll in the SME Employee Savings Plan, you must go through your company rather than applying on your own. The first step is to speak with your company's HR team or department.
first, your company will go to the Tomorrow's Savings Credit website and complete the application process online. Second, the Small Business Administration will review your application and approve it. third, once approved, the company pays the first installment. fourth, the incumbent opens an account in his/her name at IBK or Hana Bank, and the process is complete.
currently, only IBK and Hana Bank are available for account opening, but two more commercial banks will be added later this year. with more options, you'll be able to choose a bank that's convenient for you.
small business tax credits benefit companies, too
the small business tax credit isn't just for workers, it's for companies too. businesses that participate in the Small Business Tax Credit can receive an income tax reduction of up to 90 percent on the business contributions they make.
for companies, it's a great way to retain top talent, improve worker well-being, and get a tax break all at the same time. That's why many small businesses are actively participating in the third year of the Tomorrow's Tax Credit.
if your company hasn't implemented this program yet, it's worth asking your HR team about it. it's a win-win for both the company and the employee, and they're likely to look at it favorably.
frequently asked questions
Q1. Is the Small Business Thrift Savings Plan cancelable?
yes, you can terminate, but there are penalties. if you terminate before maturity, you may lose your company match and some of your interest, so it's best to choose your term carefully and stick with it. if you have to cancel due to unavoidable circumstances, you'll get the principal amount you paid back.
Q2. What happens to my savings if I leave my small business?
if you leave the company, you can't make any more contributions, but the amount you've built up will be preserved. you can keep it until maturity or choose to terminate it early. if you move to another small business, you can also re-enroll at your new company.
Q3. Should I choose a 3-year or 5-year plan?
your choice depends on your tenure plans and savings goals. if you need money in a relatively short period of time or don't feel comfortable saving for the long term, a 3-year plan is best for you. if you're looking to save a larger amount and are confident about your long-term tenure, we recommend the 5-year plan.
Q4. Are there any requirements to join the SME Savings Plan?
anyone who works for a small or medium-sized business can join, regardless of employment type, age, or years of service. the only exclusions are those who work in the entertainment industry or in a meandering business.
Q5. Can I change my monthly payment amount midstream?
you can change your payment amount on a limited basis. it's best to check with your bank or the Small Business Administration for the exact terms of the change. it's important to set an amount that you're comfortable with when you initially sign up.
closing thoughts
the 3-year SME Employee Savings Allowance is a great opportunity for those who work for small businesses to build a stable nest egg. the money you save, combined with your company's contribution and bank interest, can build an asset on much more favorable terms than a regular savings account.
it's a practical scheme that you can use for any purpose, whether it's a wedding fund, a down payment on a house, or a start-up fund. if you're an employee of a small or medium-sized business, it's worth talking to your HR team and signing up as soon as possible.
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