Requirements under the ORS Ordinance

Requirements for Registration and Exemption

Employers who operate occupational retirement schemes that fall under the ambit of the ORSO are required to apply to the MPFA for registration or exemption of their schemes. In respect of a new scheme, the application must be made to the MPFA within three months after the employer has entered into a contract with his or her employees for the setting up of the scheme. It is an offence for any employer to operate, contribute to, or otherwise participate in a scheme or enter into a contract with his employees under which membership of a scheme is provided without the necessary approval of registration or exemption from the MPFA.

ORSO exempted schemes - Exemption from the ORSO may be allowed for offshore schemes which are registered or approved by a recognized overseas authority; or for schemes with not more than either 10% or 50 of their members, whichever is less, who are holders of a Hong Kong permanent identity card.

On-Going Requirements for Registered Schemes

Once a retirement scheme has been registered under the ORSO, it must comply with certain basic requirements, which include:

a. Assets
Except in special circumstances specified by the ORSO, the assets of a scheme must be kept separate and distinct from, and must not form part of:
• the assets of the employer, or
• the assets of the administrator of the scheme which are not vested in him in his capacity as such.

Besides, the assets of a registered scheme must only be applied for the purposes of the scheme.

b. Trusteeship
In the case of a scheme governed by a trust, there should be at least one independent trustee who must not be the employer himself, his employee or associate (as defined in the ORSO) unless such associate is a trust company registered under the Trustee Ordinance.

c. Investment
Any loan to the relevant employer of a scheme or his associate out of the scheme's assets is prohibited. Not more than 10% of the assets of the scheme should consist of Restricted Investments as defined by the ORSO.

Subject to the extent allowed under the ORSO, no asset of the scheme acquired on or after 15 October 1993 should consist of investments in the share capital of a body corporate, which is neither listed on a recognized stock market as defined in the Securities and Futures Ordinance, nor publicly listed on a specified stock exchange.

d. Funding
Subject to the provisions of the ORSO, the assets of a registered scheme should be sufficient to meet its aggregate vested liability, and such a scheme should be funded in accordance with the terms of the scheme and (where the scheme is a defined benefit scheme) recommendations, if any, contained in the actuarial certificate.

As regards a defined benefit scheme, any shortfall between the scheme's assets and its aggregate past service liability as identified by the actuary must be made good within the period as agreed between the relevant employer and the administrator of the scheme.

e. Independent audit and actuarial review
The ORSO requires that proper accounts and records regarding all assets, liabilities and financial transactions of a registered scheme be kept by its administrator. This person is also responsible for preparing the financial statements as soon as reasonably practicable after each financial year of the scheme, and submitting such statements to an independent auditor for audit, requiring the auditor to prepare a report on the accounts. In addition, the relevant employer is also required to appoint an auditor to carry out an audit and give a statement to the administrator's auditor regarding the making of contributions to the scheme.

In respect of a defined benefit scheme, actuarial reviews must be undertaken by an actuary once every three years to ascertain the financial position of the scheme. If the actuary finds that the scheme is insolvent, a yearly actuarial review is required.

f. Disclosure of information
The relevant employer of an ORSO registered scheme must -

1. provide each employee (scheme member) with relevant information about the scheme, including that concerning the criteria and conditions of membership and how contributions and benefits are calculated and payable under the scheme within the specified time limit;
2. provide each scheme member with an annual statement of his or her benefit entitlement under the scheme;
3. upon the written request of a scheme member who has ceased to be employed, provide particulars of that member's benefits entitlement under the scheme, within 3 months after the cessation of employment; and
4. inform scheme members of any amendments to the scheme.

The consultative committee of a registered scheme (if one has been formed by election amongst scheme members) or any scheme member also has the right to request for certain information relating to the scheme from the relevant employer or the designated person.

g. Others
There are also other requirements such as submission of annual returns and notification of certain changes of scheme particulars.

For more details, please click to view A Guide to the Occupational Retirement Schemes Ordinance.

On-Going Requirements for Exempted Schemes

For an exempted occupational retirement scheme, the relevant employer is required to comply with the requirements to submit Compliance Certificates or Membership Statements and notification of changes of scheme particulars.

Occupational Retirement Schemes Appeal Board

The ORSO provides for the constitution of an appeal board. The functions of the board are to determine appeals against the MPFA's decision to refuse an application for registration or exemption and appeals against its decision to cancel the registration of a registered scheme or withdraw the exemption certificate of an exempted scheme.