Staff in attendance :

Mr LEE Yu-sung

Senior Assistant Legal Adviser

Miss Anita HO

Assistant Legal Adviser 2

Mr Daniel HUI

Senior Assistant Secretary (1)5

I Meeting with the Administration

Members continued the scrutiny of proposed amendments to the Mandatory Provident Fund Schemes Ordinance (MPFSO).

Section 8

2. Members noted that as proposed sections 7A and 7C had included provisions on the obligations of employers, employees and self-employed persons to participate in and contribute to registered MPF Schemes, the existing section 8 would therefore be repealed.

Proposed section 11

3. Members noted the following clarifications provided by the Administration regarding the proposed amendments:

1. subsections (1) to (4) were re-drafted to improve textual clarity;

2. newly added subsections (5) and (6) allowed voluntary contributions in excess of the level of mandatory contribution and to provide an option for self-employed persons and employees whose income was below the minimum level of $4,000 per month to make contributions; and

3. proposed subsections (7) to (9) specified that certain provisions of the MPFSO with respect to vesting, portability and withdrawal of accrued benefits would not be applicable to voluntary contributions.

4. The Assistant Director/Scheme Operations (AD/SO) informed members that the proposed section 12A was to substitute part of the existing section 15(3) on the offsetting arrangements for severance payments and long service payments against the employer-funded portion of accrued benefits as currently provided under the Employment Ordinance. In response to a member, AD/SO confirmed that the Labour Advisory Board (LAB) had been informed of the proposed provisions under section 12A and that as a matter of policy, it would be up to the LAB to review the offsetting arrangements for severance/long service payments against retirement benefits.

Proposed section 14

5. Members noted that the proposed amendments sought to achieve the following objectives:

1. providing employees with a statutory right in exercising options on portability of accrued benefits upon a change of employment or under other circumstances prescribed in the Regulation; and

2. specifying the legal obligations of employers and trustees in effecting an employee’s choice on portability of accrued benefits during changes of employment.

6. Elaborating on the need for setting out in law the procedures for the MPFA and the court in handling claims for payments from the Compensation Fund (CF), AD/SO explained that the proposed amendments sought to delineate the respective responsibilities of the MPFA and the court with a view to shortening the time taken in handling such claims. The information required to be included in MPFA’s investigation report would be detailed in the relevant subsidiary legislation.

7. In reply to the Chairman, AD/SO advised that the MPFA’s investigation was essentially a fact-finding exercise to identify whether losses of accrued benefits had occurred and the circumstances leading to such losses. The MPFA would not offer an opinion as to whether misfeasance or illegal conduct on the part of service providers had been involved. She added that when scrutinising the relevant bill in 1995, LegCo members were of the view that the power to determine whether misfeasance or illegal conduct had been involved should be vested with the court.

8. Addressing members’ concern on the long lead time taken in conducting investigations and obtaining a court order before payment could be made from the CF, AD/SO advised that a MPF scheme under investigation or court proceeding could transfer or pay out MPF benefits upon completion of the valuation of loss on scheme assets which might only take a few weeks. The trustee would then be required to process portability and withdrawal cases in accordance with the valuation results. Moreover, to further protect scheme members, the proposed section 17C specified that interest must be added to the award of compensation from the CF.

Proposed section 18

9. Members noted that the proposed section 18 would empower the MPFA to impose penalty interest up to 15% of the outstanding amount on persons defaulting contributions.

Proposed section 20

Proposed section 21

12. In connection with industry schemes, Miss CHAN Yuen-han expressed grave concern about vesting the executive power in relation to the operation of industry schemes with the MPFA, thus reducing the role of the Industry Schemes Committee (ISC) to an advisory one. She urged the Administration to review the relevant provisions to enable the ISC to play a prominent role in monitoring the effective implementation of industry schemes and in bringing about improvements. In response, the Administration provided the following clarifications:

1. in view of the special nature of industry schemes, the MPFA would have to play a more active role in the setting up and operation of such schemes, such as prescribing scheme conditions in the tendering requirements, selection and registration of trustees and designating industries for which industry schemes should be set up; and

2. in deciding the coverage and the number of industry schemes to be set up, the MPFA would have to consult the future ISC which would include representatives from the senior management of the MPFA and the trustees concerned. The ISC was entrusted with a number of statutory functions the main purpose of which was to monitor and ensure the effective implementation of industry schemes.

Proposed section 22B

13. In response to a member’s enquiry on how the annual registration fee on approved trustees was determined, AD/SO confirmed that the annual registration fee would be charged as a percentage on the scheme assets.

14. Members noted that the Administration would move a Committee stage amendment (CSA) to delete "but any amount appropriated ..... is to be disregarded" which had been inadvertently included under proposed section 22B(3).

Proposed deletion of section 23

15. Miss CHAN Yuen-han raised strong objection to the proposed deletion of section 23 on Residual Provident Fund Scheme (RPFS) on the following grounds:-

1. the RPFS had been included in the principal ordinance in 1995 in response to grave concerns raised by the labour sector over the difficulties of low-income earners in joining a regular MPF scheme in the market;

2. on top of the "no-rejection" requirement, the RPFS should be retained as a last safety net for low-income earners who were genuinely unable to participate in a regular scheme; and

3. issues related to the protection of low-income earners had been discussed at length at the former Subcommittee on Mandatory Provident Fund System and the Administration should not dispose of a protective measure so readily.

Miss CHAN said that the labour sector might have objected to the passage of the MPF Schemes Bill in 1995 if there were no provisions on a RPFS.

16. In response, the Administration explained that the proposed deletion of section 23 was based on the following considerations:-

1. the Administration had believed from the outset that the majority of eligible persons would be able to join MPF schemes available in the market. Nevertheless, to cater for a small number of persons who were genuinely unable to join a regular scheme, it was agreed that a RPFS would be established;

2. it should be borne in mind that under the current provisions, the RPFS was only a last resort. A person could not join the RPFS freely and could only do so after placement service by the MPFA to enrol him in a regular scheme had failed;

3. as a result of discussions with members and having consulted the retirement scheme industry, it was now proposed to impose a "no-rejection" requirement on trustees of all master trust schemes and industry schemes. In anticipation that no eligible persons would be rejected under this statutory requirement, there was no need to maintain a RPFS;

4. the future MPFA would closely monitor the implementation of the "no-rejection" provisions. All MPF scheme rules would be examined by the MPFA with a view to ensuring that there was no discrimination against low-income earners. Trustees in breach of the "no-rejection" requirement would risk being sanctioned; and

5. the co-existence of section 23 and the "no-rejection" requirement in the Ordinance would mean that the MPFA would have to put in resources to provide a placement service which was virtually unneeded. It was also doubtful whether any approved trustee would be interested in bidding to be the operator of a RPFS.

II Any other business

18. The Chairman informed members that Mr WONG Siu-yee had applied to join the Bills Committee after the deadline for signifying membership for the reason that he was ill at the time when membership was called for. The Chairman said that he had accepted Mr WONG’s late membership on grounds of indisposition in accordance with the relevant House Rule.

21. The Chairman reminded members that the next meeting of the Bills Committee would be held on 4 December 1997 at 2:30 pm.

22. The meeting ended at 4:30 pm.

Provisional Legislative Council Secretariat
17 December 1997