ORSO

Basic Requirements

Basic Requirements for Registered Schemes
For retirement schemes registered under the ORSO, scheme employers and administrators must comply with the ORSO requirements, including (but not limited to):

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Assets

Except in special circumstances, the assets of a scheme must only be applied for the purposes of the scheme and must be kept separate from the following assets and distinct from, and must not form part of:


  • the assets of the employer of the scheme; or
  • the assets of the administrator of the scheme (i.e. assets that are not vested in the administrator in their capacity as an administrator).

Assets of a scheme must be sufficient to meet its aggregate vested liability. The scheme shall be funded in accordance with the terms of the scheme and, if the scheme is a defined benefit scheme, the recommendations, if any, in an actuarial certificate.

 

Assets of a scheme must not include loans to the employer of the scheme or to his/her associates. Restricted investments in aggregate shall not be more than 10% of the assets of the scheme.

Trusteeship
For schemes governed by a trust, there should be at least one independent trustee who must not be the employer himself/herself, his/her employee or associate, unless the associate is a trust company registered under the Trustee Ordinance. 

With respect to the administration of schemes, trustees’ must perform the following duties which include:

 

  1. exercise a reasonable level of care, skill, diligence and prudence
  2. use all knowledge that can reasonably be expected to administer, manage and maintain the scheme
  3. ensure assets are invested in different investments so as to minimize the risk of losses of those assets
  4. put the interests of scheme members before the trustee’s own interest
  5. act in accordance with the terms of the scheme
Transfer of benefits
Employers of a scheme (i.e. the receiving scheme) must not accept a transfer of benefits from another registered scheme or exempted scheme (i.e. the transferring scheme), unless

 

  1. the transfer is made in accordance with an agreement between the employers of the receiving scheme and transferring scheme;
  2. the benefits are payable to a member of the receiving scheme who was a member of the transferring scheme; and
  3. the benefits are held in an account in the name of the member under the transferring scheme before the transfer, and in an account in the name of the member under the receiving scheme after the transfer.
Annual return / actuarial certificate

A scheme administrator must keep proper accounts and records of the scheme. After each of the scheme’s financial year, the administrator must prepare the financial statements as soon as possible, and submit them to an independent auditor for audit and require the auditor to prepare a report on the accounts.

 

Employers are 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. The statement must be sent to the administrator’s auditor not later than four months after each financial year of the scheme. For details, please refer to Guidelines on the Statement of the Employer's Auditor .

Annual returns, the auditor’s reports and audited financial statements must be supplied to MPFA within six months after the end of a scheme’s financial year.


Defined benefit schemes must be reviewed by an actuary once every three years. If the scheme is found to be insolvent, an actuarial review is required every year. The actuary who prepares the actuarial certificate for a scheme must not be (a) the relevant employer of the scheme, (b) an associate or employee of the employer, or (c) a person having a contract of service with the employee referred to in (b).


A defined benefit scheme’s actuarial certificate must be submitted to MPFA within six months after the end of the relevant financial year.

If a scheme is terminated, MPFA requires the annual return, audited financial statements and auditor’s report to report on the scheme’s position up to the later (in general, around 18 months) of the following dates:


  • the scheme’s effective date of termination, as appears on the Notice of Termination/Winding Up of a Registered Scheme; or
  • the date on which all the benefits under the scheme have been paid to members or (if applicable) the assets of the scheme have been transferred to another scheme.
Annual written statement by employers

Within one month after the end of a financial year, employers of a scheme are required to provide MPFA with a written statement, confirming that at all times during the financial year: 

 

  1. the scheme has by its terms limited scheme membership to eligible persons; 
  2. all members of the scheme are eligible persons.

 

Disclosure of information
Employers of a scheme are required to provide certain information for scheme members. Scheme members or a scheme’s consultative committee have the right to request certain information from the employer or the scheme’s designated person. The consultative committee can be formed by election among scheme members if the scheme has more than 20 members and the majority of the scheme members agree to its formation.
Notification of changes

MPFA must be notified within one month of the following changes:

 

  • the name or address of the scheme administrator and designated person (notified by the designated person, in a form specified by MPFA)
  • the name or address of the employer (notified by the employer, in a form specified by MPFA)
  • the administrator / relevant employer / representative employer (notified by the employer, in a form specified by MPFA)
MPFA should be notified of any changes in a scheme’s domicile as soon as reasonably practicable.
Notification of reportable events

If employers or administrators of a scheme become aware of a reportable event that occurred on or after 26 June 2020, they must, within seven working days, give a written notice to MPFA setting out the particulars of the event, permit MPFA to inspect the record and provide further details of the event upon the request of MPFA.

 

A “reportable event” refers to non-compliance with requirements in relation to scheme assets, members’ benefits, funding, trusteeship, investment, transfer of benefits or eligible persons.

 

For a sample of the written notice, please refer to Notification of Reportable Event.

Settlement of periodic fees
Employers must pay an annual fee to MPFA within one month after the annual due date, otherwise a surcharge equal to the amount of the unpaid fee will be imposed. The annual due date refers to the last day of each period of 12 months during which the scheme continues to be a registered scheme and beginning on the first or any subsequent anniversary of its registration. The annual fee is $3,700 for an individual scheme and $1,800 for a pooled scheme.
 
Employers can pay in Hong Kong dollar by crossed paper cheque, bank draft or e-cheque made payable to “MPFA Administration Account”. Payment by e-cheque should be made via the e-Cheque Collection Portal.
Termination / winding up of registered schemes
Employers and designated persons of a scheme must, within 14 days after the winding up or termination process of the scheme commences, give a written notice to MPFA and each member of the scheme.
 

For registered schemes with an MPF exemption certificate

In addition to the above, MPF exempted ORSO schemes must comply with the following:

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Option offer
Employers are required to provide new eligible employees (if applicable) with an option to choose between an ORSO scheme and an MPF scheme. 

Employers who have applied for an MPF exemption certificate before the commencement of the MPF System are required to provide a one-time option for existing ORSO scheme members to remain in the ORSO scheme or become members of an MPF scheme.

Employers who decide to reduce members’ future benefits or rights under the existing ORSO scheme must provide members with an option to join an MPF scheme instead.
Trustee standards

Trustee which is a company

 

  1. In the case of a company incorporated in Hong Kong, it shall be a registered trust company
  2. In the case of a company incorporated outside Hong Kong, it shall satisfy MPFA that:
  • it is comparable to a registered trust company; and
  • it has a significant presence and control in Hong Kong.

Trustee who is an individual

 

  1. In the case of a non-employer trustee, he must satisfy MPFA that:
    • he/she is a person of good reputation and character and, in particular, has not been found guilty of an offence involving fraud or dishonesty;
    • he/she has the skill, knowledge, experience and qualifications that are, in the opinion of MPFA, necessary for the successful operation of the scheme;
    • he/she has no past or present association (financial or otherwise) that could affect the impartiality of his/her independent judgment, such as with:
    • the employer of the scheme (except as a professional adviser or, if the employer is a company, as a director of the company)
    • any associate of the employer
    • any controller of the employer
    • any associate of any such controller
    • he/she is not the auditor, investment manager or actuary of the scheme; and
    • he/she is ordinarily a resident in Hong Kong.
  2. In the case of an employer trustee, he/she must satisfy MPFA that he/she is a person of good reputation and character and, in particular, has not been found guilty of an offence involving fraud or dishonesty.

Where the trustees of a scheme are all individuals, upon any retirement of an existing trustee or appointment of a new trustee, there must be not fewer than two trustees, of whom not fewer than one must be a non-employer trustee who complies with the requirements of (I) above.

Director of a trustee

 

Any director of a company which is a trustee of a scheme, other than a trustee covered in “trustee which is a company” above, must satisfy MPFA that:

  • he/she is a person of good reputation and character and, in particular, has not been found guilty of an offence involving fraud or dishonesty; and
  • he/she, or another director of the company, has the skill, knowledge, experience and qualifications that are, in the opinion of MPFA, necessary for the successful operation of the scheme.
Reporting of changes in trustees
Approval must be obtained from MPFA before the retirement or appointment of the trustee of a scheme. In the case of a trustee which is a company and not a registered trust company, or a company incorporated outside Hong Kong and not a registered trust company, the retirement or appointment of a director of the trustee of a scheme must be approved by MPFA in writing.

Application for pre-approval of the appointment of a trustee or a director of a trustee should be made in writing to MPFA together with a prescribed form.
Appointment of investment managers

No person shall be appointed to be the investment manager of a scheme except an investment management company that is:

 

  1. a corporation licensed to carry on, or an authorized financial institution registered for carrying on, a business in asset management under Part V of the Securities and Futures Ordinance; or
  2. a company authorized by an authority recognized by MPFA to carry on, under the law of a place outside Hong Kong, the business referred to in (I).
Investment standards
  • The trustee and investment manager of a scheme shall ensure that:
  1. derivatives are not used in such a way as to result in the assets of the scheme becoming leveraged
  2. money is not borrowed for any of the purposes of a scheme except for the purpose of:
  • paying accrued benefits to or in respect of scheme members, and then only if:
    • the amount borrowed is not more than 10% of the market value of the assets at the relevant time;
    • the borrowing is not part of a series of borrowing; and
    • the period for which the money is borrowed is not more than 90 days; or

  • settling transactions involving the acquisition or disposal of securities or other investments relating to the scheme, and then only if:
    • the period for which the money is borrowed is not more than seven days; and
    • at the time the decision to enter into those transactions was made, it was unlikely that the borrowing would be necessary
  • The assets of a scheme are leveraged if the effective exposure of the assets exceeds the market value of the assets.
Withdrawal of MPF exemption certificates

When withdrawing an MPF Exemption Certificate, the employer/representative employer must submit an application in the prescribed format (i.e. Form WD-ER).

Others

Employers must also:

 

  1. display the exemption certificate in a conspicuous position at their principal office in Hong Kong or at every premise where members of the ORSO scheme works; and
  2. provide each member of the ORSO scheme with a copy of the exemption certificate.