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FAQs on MPF Exempted ORSO Schemes
| 3. |
What are the requirements for an ORSO registered scheme to be granted MPF exemption? Can a relevant employer set up an ORSO scheme and apply for MPF exemption now? |
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Answer: |
According to the Mandatory Provident Fund Schemes (Exemption) Regulation ("the Regulation"), a relevant ORSO registered scheme can apply for MPF exemption if -
| (a) |
the scheme is governed by a trust; |
| (b) |
the scheme provides benefits payable on termination of service, death, disability, retirement or winding up of the scheme; |
| (c) |
the scheme was established before or on 15 October 1995; and |
| (d) |
an application under section 7 or 15 of the Occupational Retirement Schemes Ordinance in respect of the scheme was received by the Registrar of Occupational Retirement Schemes not later than 15 January 1996. |
An employer who spins off a new scheme from a relevant ORSO registered scheme may now apply for MPF exemption under section 16 of the Regulation. The MPFA considers the following when exercising its power to issue an exemption certificate:
| (a) |
whether the scheme is a new scheme established as a result of scheme restructuring or bona fide business transactions (including company amalgamation, restructuring and joint ventures); |
| (b) |
whether the members of the original scheme were exempt from the MPF legislation; |
| (c) |
whether the terms and conditions of the scheme are generally as favourable as the original schemes; and |
| (d) |
whether a substantial portion of the members of the scheme comprise members of the original schemes. |
To obtain a copy of the application form and the relevant guidelines, please click here.
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| 4. |
Under what circumstances is an employee entitled to choose between an MPF scheme and an MPF exempted ORSO scheme? |
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Answer: |
Pursuant to the Mandatory Provident Fund Schemes (Exemption) Regulation, any relevant employer who operates an MPF exempted ORSO scheme needs to provide his new eligible employees (on the condition that the governing rules of the ORSO scheme opens membership to them) with an option to choose between an MPF scheme and the MPF exempted ORSO scheme, together with the specified information to facilitate the employees' decision.
Furthermore, members of an MPF exempted ORSO registered scheme are also entitled to an option to choose between an MPF scheme and the ORSO scheme when the relevant employer decides to reduce the members' future benefits or rights under the ORSO scheme.
To know more about the rights of employees, please refer to Offer of options under MPF exempted ORSO schemes under Notes to the Employees
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| 5. |
What is "MMB"? |
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Answer: |
MMB is the abbreviation of "Minimum MPF Benefits". The Mandatory Provident Fund Schemes (Exemption) Regulation ("the Regulation") stipulates that accrued benefits in respect of a member who has joined an MPF exempted ORSO registered scheme after 1 December 2000 (i.e. a new member as defined under the Regulation) are subject to the preservation, portability and withdrawal requirements up to an amount equivalent to the MMB.
The MMB is defined as the lesser of:
| a. |
if the member has been a member of the scheme for not less than 12 months after 1 December 2000, the period of 12 months (excluding any unpaid leave or maternity leave taken by the member pursuant to any enactment or contract) immediately preceding the date of termination of his employment, or the date on which he ceases to be a member, or the effective date of the withdrawal of the exemption certificate; |
| b. |
in any other case, the period (excluding any unpaid leave or maternity leave taken by the member pursuant to any enactment or contract) since the date the member joined the scheme or 1 December 2000, whichever is the later, to the date of the termination of his employment, or the date on which he ceases to be a member, or the effective date of the withdrawal of the exemption certificate; and |
"years of post-MPF service" means the member's continuous years of service (including part thereof) from the date he joined the scheme or 1 December 2000, whichever is the later, to the date of termination of his employment, or the date on which he ceases to be a member, or the effective date of the withdrawal of the exemption certificate.
Please refer to V.4 Guidelines on MPF Exempted ORSO Scheme - Preservation of Benefits for illustrative examples.
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| 6. |
In calculating the MMB of a new member of an MPF exempted ORSO registered scheme, how do I determine the "years of post-MPF service" for an employment period that contains incomplete months? |
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Answer: |
The Mandatory Provident Fund Schemes (Exemption) Regulation ("the Regulation") stipulates that the "years of post-MPF service" means the member's continuous years of service (including part thereof), counted from the date of joining the scheme or 1 December 2000, whichever is the later, to the date of termination of employment, cessation of scheme membership (in the case of the winding up of the scheme), or the effective date of withdrawal of the MPF exemption certificate.
In deriving the "years of post-MPF service", service is counted in complete years and complete months (not necessarily complete calendar months) of a year. In certain specific situations not mentioned in the Regulation and Guidelines, the trustee, employer and employee of the relevant ORSO scheme are advised to come to a consensus on an arrangement allowed by the governing rules of the scheme. The employer is also reminded to explain clearly to the member the basis of the calculation agreed upon.
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| 7. |
What are the preservation, portability and withdrawal requirements of the MMB for a new member in an MPF exempted ORSO registered scheme? |
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Answer: |
The Preservation Requirement
The trustee of the ORSO scheme must not pay out or otherwise dispose of any part of the MMB to any new members other than in accordance with the Mandatory Provident Fund Schemes (Exemption) Regulation; for instance, upon the new member's attainment of the retirement age of 65. Nor must the trustee forfeit a member's MMB upon dismissal for cause (note: this non-forfeiture requirement also applies to existing members who joined an ORSO scheme before or on 1 December 2000. But the existing member may withdraw and be paid the MMB in accordance with the governing rules of the scheme).
The MMB shall not be liable for, and stand charged with, the settlement of any losses suffered by the relevant employer caused by a new member. Nor shall it stand charged with any debts owing to the relevant employer or any other person by the new member.
The Portability Requirement
When a new member is entitled to receive benefits under the scheme, the trustee of the scheme should transfer, in accordance with the governing rules of the scheme, the MMB of the member as soon as reasonably practicable:
| a. |
to an MPF scheme in which the member's new employer is a participating employer; or |
| b. |
to a master trust scheme or an industry scheme, nominated by the member, that accepts transfer of minimum MPF benefits. |
The Withdrawal Requirement
The MMB of a new member can only be paid under the following circumstances:
- attainment of retirement age;
- early retirement at the age of 60;
- permanent departure from Hong Kong;
- total incapacity; and
- death.
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| 8. |
What are the rights of a member of an MPF exempted ORSO registered scheme if his future benefits or rights under the scheme are reduced? |
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Answer: |
The governing rules of an MPF exempted ORSO registered scheme should provide for the situation that, should the relevant employer decides to reduce any member's future benefits or rights under the scheme, the member is given an opportunity to join an MPF scheme.
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| 9. |
If the relevant employer of an MPF exempted ORSO registered scheme defaults on contributions to the scheme when they fall due, what is the designated person of the scheme obliged to do? Will the MPFA impose any surcharge on the contributions in arrears? |
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Answer: |
Pursuant to the Occupational Retirement Schemes (Recovery of Arrears) Rules, the designated person is obliged to undertake a number of actions so as to ensure that members' interests are safeguarded.
When the relevant employer fails to pay any contribution by the contribution due date, the designated person must, as soon as practicable, issue a written notice requiring the employer to pay the arrears within 30 days after the date of the notice. If the employer defaults on the payment, the designated person must, within seven days after the end of the 30-day period, give written notice to the MPFA of the failure to receive payment, specifying details about the employer and the amount of the arrears. The MPFA will then send a First Payment Notice to the employer, requiring payment of the arrears to the designated person within a specified period. If the employer fails to pay the arrears within the specified period, the MPFA may proceed to issue Second or Subsequent Payment Notices requiring payment of the arrears and a contribution surcharge to the designated person, as well as any financial penalty to the MPFA.
The contribution surcharge covered in the Second and Subsequent Payment Notices is calculated as follows:
Surcharge rate x Amount of the arrears x Number of days overdue;
where the surcharge rate is 15% per annum for the Second Payment Notice, and 20% per annum for the Third and Subsequent Payment Notices. The "Number of days overdue" means the number of days from the day following the contribution due date to the last day of the Second, Third or Subsequent Specified Period, whichever is applicable.
The MPFA may institute legal proceedings against the employer to recover, as a debt due to the MPFA, any arrears and contribution surcharge and penalty, if warranted, at any time considered appropriate.
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