LegCo Sub-Committee on MPF System
Information Note
Exemption Criteria for ORSO Exempted Schemes

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Purpose

This paper describes the proposed requirements to be met by an ORSO exempted scheme in order for the members and the relevant employers of the scheme to be exempt from the MPF System.

Proposal

2. Under ORSO, an occupational retirement scheme may apply for exemption instead of registration provided that :

1. the scheme is registered or approved by an authority in a country or territory outside Hong Kong and that the authority performs in the country or territory functions which are generally analogous to the functions conferred on the Registrar of Occupational Retirement Schemes (section 7(4)(a)); or
2. not more than either 10% or 50 of the scheme’s member, whichever is less, are Hong Kong permanent identity card holders (section 7(4)(b) or (c)).

3. Members of these schemes who are employed or self-employed in Hong Kong will be subject to the provisions of the MPFSO. However, if members are entering Hong Kong for the purpose of being employed or self-employed for a limited period of time only or who is covered under a home country scheme, they will be exempt from the provisions of MPFSO by virtue of section 4.

4. We propose that members and the relevant employer of an ORSO exempted scheme will be exempt from the MPF System if the following requirements have been met -

1. both existing members and new eligible employees who are not exempt under section 4 of the MPFSO are given a right to opt between the existing scheme and MPF coverage, unless membership to the ORSO exempted scheme is compelled by the law of the domicile of the scheme;
2. the relevant employer is required to disclose relevant information (as described under the information note - "Disclosure Requirements in connection with Employees’ Option") to the eligible employees to enable them to make the choice; and
3. the relevant employer is required to either set up or participate in an MPF scheme to cover those employees who opt for MPF coverage.

5. However, we propose not to require these schemes to fulfill the minimum standards on trusteeship and investments and not to impose preservation and portability requirements on the new members.

Justifications

6. As at 31 December 1996, there are 1,859 exempted schemes under ORSO, of which 39 schemes are exempted by virtue of section 7(4)(a) [see paragraph 2(a) above]. The remaining 1,820 schemes are exempted by virtue of section 7(4)(b) or (c) [see paragraph 2(b) above] and cover only about 1,900 HK permanent ID card holders in total.

7. Schemes exempted under section 7(4)(a) are typically state pension schemes such as the Singapore CPF which mainly covers Singaporeans. Schemes exempted under section 7(4)(b) or (c) are mainly employers’ home country schemes established in other countries and mainly cover employees from other countries. As indicated under paragraph 6 above, membership of these schemes may include HK permanent ID card holders, but the number involved is very small.

8. For the state pension schemes, it would be impossible for these schemes to be modified to fulfill the minimum standards on trusteeship, investments, preservation and portability proposed for ORSO registered schemes. For those home country schemes established in other countries, it would be impractical, if not impossible, to require these schemes to be modified for the relatively small number of HK permanemt ID card holders involved in each scheme. Therefore, the interface arrangements in respect of trusteeship, investments, preservation and portability for ORSO registered schemes would not be appropriate for these ORSO exempted schemes.

Mandatory Provident Fund Office
Financial Services Branch
[Ref.: Paper/MPF/SC-OI-3]
8 January 1997

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