LegCo Subcommittee on MPF System
Information Note
ORSO Interface Arrangements -
Options Available for Employers

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Purpose
Proposal

Employers Without Existing ORSO Schemes
Employers with an Existing ORSO Scheme
Various Options for an Employer without ORSO Scheme OR for a New Employer
Various Options for an Employer with an ORSO Scheme

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Purpose

This paper describes what are the options available to employers under the ORSO interface arrangements-

1. employers without existing ORSO schemes (paragraphs 2 to 4 below); and
2. employers with existing ORSO schemes (paragraphs 5 to 9 below).

Proposal

Employers Without Existing ORSO Schemes

2. For a new employer or an employer without an ORSO scheme, he is required to make arrangement to either set up or participate in an MPF scheme to cover all his employees. He may provide only basic MPF mandatory contributions, or he may decide to be more generous and provide additional supplementary benefits.

3. For employers who decided to be more generous, he has the option to provide "top-up" benefits either under an MPF scheme by making additional non-mandatory contributions or under a "pure" ORSO scheme (i.e. not an MPF exempted ORSO scheme) which can be of defined contribution or defined benefit nature.

4. Annex A sets out all these options in tabular form.

Employers with an Existing ORSO Scheme

5. For an employer with an existing ORSO scheme, he has the option to either continue to operate or wind up the ORSO scheme.

6. If an employer decided to continue with the ORSO scheme, he may use the ORSO scheme in two ways: either as a top up scheme or as a core scheme.

1. Top up scheme

   In this case, the employer needs to operate or participate in an MPF scheme which provides all existing and new employees with the basic MPF mandatory contributions. He may want to re-design the terms of the ORSO scheme to take account of the benefits provided under the MPF scheme.

2. Core scheme

   In this case, the employer would wish to have most, if not all, of his employees covered by the ORSO scheme. He would seek exemption from MPF requirements and make the necessary changes to the ORSO scheme required for exemption purpose (see information notes - "Exemption Criteria for ORSO Registered Schemes" and "Exemption Criteria for ORSO Exempted Scheme"). Nevertheless, he would still need to operate or participate in an MPF scheme for those employees who opt to have MPF coverage instead. In respect of the MPF scheme, the employer may want to design the non-mandatory contribution rates and vesting scale in such a way that the scheme would either provide similar level of benefits or require similar level of funding cost to the MPF exempted ORSO scheme, in order to provide equitable treatment to the two classes of employees in the MPF exempted ORSO scheme and the MPF scheme respectively.

7. If an employer decided to wind up the ORSO scheme, he has the option to either wind it up immediately by paying out all the liabilities; or wind it up gradually by closing the scheme to new members, freezing the pensionable service of the existing members and paying out the liabilities as and when they leave employment. All existing and new employees will be covered under an MPF scheme from then on.

8. Another option that is available to the employer is to close the scheme to new members but existing members will continue to accrue future benefits under the ORSO scheme. The employer would be required to seek exemption from MPF requirements with respect to these existing members. All new employees will be covered under an MPF scheme.

9. Annex B sets out the various options in tabular form.

Encls.

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

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Annex A

Various Options for an Employer without ORSO Scheme OR for a New Employer

I. Operate or Participate in One Scheme Only - MPF Scheme

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Annex B

Various Options for an Employer with an ORSO Scheme

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