The welfare ministry will allow well-performing "kosei nenkin kikin" add-on corporate pension funds to be maintained under a draft bill unveiled Monday.
Although the add-on system had been planned to be scrapped under the previous administration, led by the Democratic Party of Japan, the ministry changed course after the Liberal Democratic Party ousted the DPJ from power in last December's House of Representatives election.
The LDP has called for pension funds that perform strongly under the program to remain.
At a meeting of its Social Security Council's working group on the pension system on Monday, the ministry presented a set of draft bills, including one to revise the "kosei nenkin" corporate employee public pension insurance act to encourage troubled pension funds to dissolve.
It aims to submit the bill during the ongoing session of the Diet, or parliament, through June and put it into effect in April next year.
Under the kosei nenkin kikin add-on program, about 560 funds across the country manage kosei nenkin public pension assets on behalf of the government.
About 40 percent of the funds, however, have shortfalls in reserves for the public pension assets, reflecting the sluggishness of the Japanese stock market over a long period.
Under the revised law, kosei nenkin kikin funds with reserve shortfalls for the proxy portion would be encouraged to disband in five years after the law takes effect.
It would allow funds to continue if their total assets are 50 percent or more larger than the needed public pension assets managed for the government. Only about 10 percent of existing funds are expected to meet the condition.
Funds would be urged to disband or transform themselves into other corporate pension systems if their total assets are less than 50 percent of the needed proxy assets.