Provisional Legislative Council

PLC Paper No. CB(1)1148
(These minutes have been
seen by the Administration)

Ref : CB1/BC/3/97

Bills Committee on
Provident Fund Schemes
Legislation (Amendment) Bill 1997

Minutes of the meeting held on Monday, 19 January 1998, at 10:45 am in the Chamber of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Dr Hon LAW Cheung-kwok (Deputy Chairman)
Hon WONG Siu-yee
Hon HO Sai-chu, JP..
Hon LEE Kai-ming
Hon Henry WU
Hon MA Fung-kwok
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon YEUNG Yiu-chung
Hon Ambrose LAU Hon-chuen, JP
Hon CHOY So-yuk

Members absent :

Hon James TIEN Pei-chun, JP
Hon Mrs Peggy LAM, JP
Dr Hon Mrs TSO WONG Man-yin
Hon Paul CHENG Ming-fun, JP
Dr Hon TANG Siu-tong, JP
Hon NGAN Kam-chuen

Public officers attending :

Mrs Pamela TAN

Mandatory Provident Fund Office
Mr Raymond TAM

Assistant Director/Regulatory Standards
Mandatory Provident Fund Office

Ms Hendena YU
Senior Managr/ORSO Interface

Mandatory Provident Fund Office
Mr Geoffrey FOX

Senior Assistant Law Draftsman
Department of Justice

Clerk in attendance:

Miss Polly YEUNG
Chief Assistant Secretary (1)3

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 commenced scrutiny of the draft Mandatory Provident Fund Schemes (Exemption) Regulation and deliberated on the following proposed sections.

Draft Mandatory Provident Fund Schemes (Exemption) Regulation

Proposed section 2

2.Noting that retirement schemes established under the Occupational Retirement Schemes Ordinance (ORSO) after the cut-off date of 15 October 1995 would not be eligible for exemption under the MPF Schemes Ordinance, some members were concerned that this provision might result in the winding up of a considerable number of ORSO schemes established after the cut-off date upon implementation of the MPF Schemes Ordinance. Consequently, retirement benefits of members of the affected ORSO schemes offering more favourable terms would be reduced on transfer to MPF schemes. In response, the Assistant Director/Regulatory Standards (AD/RS) said that the issue had been discussed by the former LegCo Subcommittee on MPF System. It was agreed that a cut-off date was necessary to streamline administrative procedures and to avoid the establishment of a large number of ORSO schemes with substandard configurations before the implementation of the Ordinance solely for the purpose of seeking exemption under the MPF system. The Administration considered that the proposed approach had struck a reasonable balance between preserving the integrity of the MPF system and minimising interference with ORSO schemes already set up by employers voluntarily at the time of the enactment of the MPF Schemes Ordinance in 1995.

3.At the request of members, the Administration would provide further information on the number of ORSO schemes set up after the cut-off date of 15 October 1995. Admin

Proposed section 4

4.AD/RS explained that most local members of ORSO exempted schemes were employees of overseas companies or overseas governments working in Hong Kong. He added that under the proposed section, existing members and newly eligible employees of ORSO exempted schemes would be allowed to elect remaining in the ORSO exempted scheme or joining a MPF scheme.

Proposed section 27

5.In reply to members, the Senior Assistant Legal Adviser (SALA) confirmed that under proposed section 27(3), future amendments to Schedules to the Regulation would be subject to the approval and amendment of the legislature.

Proposed Schedule 1

Proposed Part 1

6.At the Deputy Chairman’s request, the Administration would amend item 7 of proposed Part 1 to the effect that the employer of an ORSO exempted scheme would be required to provide also the "fax number" of the person who could respond to enquiries relating to the ORSO exempted scheme and the MPF scheme to existing members and newly eligible employees of the ORSO exempted scheme. A similar amendment would also be made to proposed Part 2 - item 9. Admin

Proposed Part 2

7.Some members were concerned that the employer of an ORSO registered scheme might not provide adequate information to its employees when the latter were required to elect whether to remain in the ORSO registered scheme or to join an MPF scheme. In response, the Administration confirmed that the MPFA would issue guidelines under item 5 of proposed Part 2 on illustrative examples demonstrating the difference in benefits between the relevant ORSO registered scheme and the MPF scheme.

Proposed Schedule 2

Proposed section 8

8.Some members enquired whether there was any provision restricting an employer of a MPF-exempted ORSO-registered scheme from reducing members’ benefits under the scheme. In reply, AD/RS advised that as ORSO schemes were voluntary in nature, the employer’s obligations would only be bound by the terms of the relevant employment contract. The purpose of the proposed section was to provide employees with a right to switch to a MPF scheme should the employer of the ORSO registered scheme reduced future benefits under the scheme. Admin

Proposed section 10

9.In response to the Chairman’s concerns, the Administration would amend the proposed section to enable the MPFA to extend, if necessary, the 6-month deadline for the trustee of a MPF-exempted ORSO-registered scheme to submit an annual report to the Authority. Admin

Proposed Schedule 3

Proposed section 1

10.AD/RS advised that in line with a Committee stage amendment to the Bill to be moved by the Administration , the expression "chief executive" would be amended to "chief executive officer" when referring to the chief executive of a company. Admin

Proposed section 3

11.AD/RS advised that the proposed section sought to regulate the appointment of investment managers of a MPF-exempted ORSO-registered scheme after the implementation of the MPF system. The Administration anticipated that relying solely on locally registered investment managers might not be able to satisfy the large demand for investment managers after implementation of the MPF system. To address the issue, proposed section 3(1)(b) would enable the appointment of an overseas investment adviser to be the investment manager of the scheme provided that the overseas investment adviser was duly authorized by an authority recognized by the MPFA. In this regard, the MPFA would consult the Securities and Futures Commission in determining the recognized overseas authorities for the purpose of subsection (1)(b).

12.In reply to members, AD/RS confirmed that under proposed subsection (2), investment managers of MPF-exempted ORSO-registered schemes appointed before implementation of the MPF system would not be affected by the requirements in the proposed section.

Draft Mandatory Provident Fund Schemes (Amendment of Schedule 6) Notice 1998

13.The Administration would replace the expression "the Governor in Council" with "the Chief Executive in Council" in the English version of the draft Notice to rectify a drafting error. Admin

II.Any other business

14.The Chairman reminded members that the next meeting would be held on 20 January 1998 at 10:45 am.

15.The meeting ended at 12:45 pm.

Provisional Legislative Council Secretariat
16 March 1998