PLC Paper No. LS 48

Paper for the House Committee Meeting of the Provisional Legislative Council on 28 November 1997

Legal Service Division Report on Provident Fund Schemes Legislation (Amendment) Bill 1997

Objects of the Bill

The main objects of the Bill are -

to reconstitute the Mandatory Provident Fund Schemes Authority (懀he MPFA� as a corporation independent of the Government and to impose requirements for accountability;
1. to establish the Mandatory Provident Fund Schemes Advisory Board and the MPF Industry Schemes Committee to provide advice to MPFA;

2. to strengthen existing enforcement measures under the Mandatory Provident Fund Schemes Ordinance (Cap. 485) (懀he Ordinance�;

3. to make provisions to cater for the special needs of sectors to whom the existing provisions of the Ordinance may bring hardship;

4. to make detailed provisions relating to the operation of mandatory provident fund schemes and the inspection powers of the MPFA; and

5. to make other minor changes to the Ordinance and consequential amendments to other ordinances.

Provisional LegCo Brief Reference

2. MPFO/AP/7/3 XXVII dated 12 November 1997 issued by the Mandatory Provident Fund Office of Financial Services Bureau.

Date of First Reading

3. 26 November 1997.

Comments

4. The Mandatory Provident Fund Schemes Ordinance (Cap. 485) provides for the establishment of non-governmental mandatory provident fund schemes (懀he MPF� for the purpose of funding benefits for retirement. At the time of enactment in August 1995, it was intended that the Ordinance provides the broad legislative framework for the MPF. Details such as the registration of schemes, approval of trustees, regulation of trustees and investments etc., are to be provided by subsequent subsidiary legislation.

5. Under the Ordinance, the MPFA is a public officer to be appointed by the Chief Executive. The functions of the MPFA are to ensure compliance with the Ordinance, register MPF schemes, approve trustees of schemes, and make rules for the operation, regulation etc. of registered schemes. In general, employees earning more than $4,000 a month and their employers are separately required to contribute 5% of the employee monthly income to an approved trustee. Self-employed persons having an income of more than $4,000 are also required to contribute 5% of their income. Contributors are not required to make contributions in respect of income in excess of $20,000 but an employee or self-employed person may elect to do so. Accrued benefits may only be withdrawn at the age of 65 except in certain circumstances under section 15(2) of the Ordinance or in subsidiary legislation to be made later. Certain categories of people, such as teachers, civil servants and hawkers, are exempted from the application of the Ordinance. According to the PLC Brief, the MPF Scheme would cover over 2 million members of the workforce.

6. The PLC has earlier set up a subcommittee to consider the proposed subsidiary legislation to be made under the Ordinance. However, the Administration later indicated it would also present a bill. The Bill would be subject to the Preparatory Committee Decision on the Establishment of the Provisional Legislative Council that laws made by the PLC should be 婫ssential to ensure the normal operation of the Hong Kong Special Administration Region� The Administration has explained why this Bill is essential in paragraph 4 of the PLC Brief.

7. The Bill proposes 100 items of amendments to the Ordinance and consequential amendments to 11 other ordinances. Details of the proposed amendments are stated in paragraphs 10 to 46 of the PLC Brief. Apart from the Bill, the Administration has also submitted the drafts of the Mandatory Provident Fund Schemes (General) Regulation and the Mandatory Provident Fund Schemes (Exemption) Regulation. A further set of draft subsidiary legislation, the Mandatory Provident Fund Schemes Rules, will be submitted later. Under the Ordinance, these subsidiary legislation are subject to amendments by the PLC. The Bill has proposed a different arrangement under which the subsidiary legislation o not take effect until they have been approved by the Legislative Council�

Public Consultation

8. According to the PLC Brief, the Administration has consulted the representatives of relevant professions, trade associations, labour unions, employer groups and other interested bodies.

Consultation with PLC Panel

9. The Bill itself has not been discussed in any Panel. The policy aspects of the two proposed subsidiary legislation have been discussed in a subcommittee set up on 17 October 1997. The Subcommittee made its report to the House Committee meeting on 21 November 1997 and recommended to form a Bills Committee to consider the Bill.

Conclusion

10. The Bill contains matters of policy which have long term implications to the community. These matters have attracted public concern and debate for a considerable period, and the Secretariat has already received representations from various interested bodies. While the Legal Service Division is still scrutinizing the legal aspects, Members may wish to form a Bills Committee at this stage to consider the Bill in detail.

Prepared by

LEE Yu-sung
Senior Assistant Legal Adviser
Provisional Legislative Council Secretariat
25 November 1997

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