Provisional Legislative Council

PLC Paper No. CB(1)1041
(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
Tuesday, 13 January 1998, at 11:00 am
in Chamber of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Hon LEE Kai-ming
Hon Mrs Peggy LAM, JP
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon Ambrose LAU Hon-chuen, JP

Members absent :

Dr Hon LAW Cheung-kwok (Deputy Chairman)
Hon WONG Siu-yee
Hon James TIEN Pei-chun, JP
Hon HO Sai-chu, JP
Hon Henry WU
Hon MA Fung-kwok
Dr Hon Mrs TSO WONG Man-yin
Hon YEUNG Yiu-chung
Hon Paul CHENG Ming-fun, JP
Dr Hon TANG Siu-tong, JP
Hon NGAN Kam-chuen
Hon CHOY So-yuk

Public officers attending :

Mrs Pamela TAN
Mandatory Provident Fund Office

Ms Maisie CHENG
Assistant Director
Scheme Operations

Mr Raymond TAM
Assistant Director
Regulatory Standards

Clerk in attendance:

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Mr LEE Yu-sung
Senior Assistant Legal Adviser

Miss Connie FUNG
Assistant Legal Adviser 3

Mr Daniel HUI
Senior Assistant Secretary (1)5

I.Meeting with the Administration

Members continued scrutiny of the draft Mandatory Provident Fund Schemes (General) Regulation (the draft Regulation) and deliberated on the following proposed sections.

Proposed section 109

2.Elucidating on the proposed section, the Assistant Director/Scheme Operations (AD/SO) advised that the maximum level of fine provided under proposed section 109(6) would be increased from level 5 to level 6 in order to make the proposed penalty provision in line with members' proposals on penalty provisions for an approved trustees' failure to comply with directions given by the MPF Schemes Authority (MPFA).

Proposed section 111

3.In reply to the Chairman, the Assistant Director/Regulatory Standards (AD/RS) explained that proposed section 111 sought to restrict the approved trustee of an employer sponsored scheme from investing more than 10% of the scheme assets in securities issued by the participating employer or its associate. However, employer sponsored schemes of an employer who was an associate of the Government would not be subject to such restriction and investment in government securities such as bonds issued by the Hong Kong Monetary Authority could exceed the 10% limit.

Proposed section 113

4.The Chairman questioned the rationale under proposed section 113(2) requiring the approved trustee of a registered scheme, instead of the self-employed person who was a scheme member, to ascertain the relevant income of that self-employed person and to confirm whether the person would contribute on a yearly or monthly basis. In response, the Administration would consider whether the proposed section should be amended to require the self-employed person to confirm the requisite information at the initial stage, failing which the approved trustee should take over the responsibility of ascertaining such information from the self-employed person.

Proposed section 114

5.In reply to members' enquiry, AD/SO clarified that a self-employed person who had incurred a net loss in business during a financial period of the MPF scheme and who had reported the situation to the approved trustee could discontinue payment of MPF contributions until he made a profit again.

Proposed section 116

6.AD/SO advised that the proposed section set out the mathematical formula for calculating the relevant income of a self-employed person who did not produce evidence of the relevant income. In this connection, the Chairman was concerned about possible technical difficulties in computing a self-employed person "relevant income if the 弎asic allowance", which was one of the elements in the said mathematical formula, was revised in the context of the Budget but the financial period of the MPF scheme might not tie in with that of the Government. At the request of the Chairman, the Administration would consider whether the proposed provision would require any modification.

Proposed section 118

7.In reply to members' enquiry, AD/SO confirmed that if a self-employed person had sustained a net loss during a financial period of the registered MPF scheme, the person would be responsible for lodging with the trustee a statement showing the amount of the loss and how it was calculated. Moreover, the method of calculating the loss had to be in accordance with relevant provisions of the Inland Revenue Ordinance. In this connection, members were concerned that the requisite calculations might be very complicated and suggested that the MPFA should issue guidelines on methods of calculating the net profit/loss to assist self-employed persons. At members' request, the Administration would consider amending proposed section 118(2) to require that the calculation should be in accordance with the relevant guidelines.

Proposed section 120

8.AD/SO confirmed that "Relevant income" as defined in the MPF Schemes Ordinance (MPFSO) would include all cash payments by the employer to the employee except housing allowance and this definition had a wider coverage than the definition of relevant income" under the Employment Ordinance.

9.Elaborating on proposed section 120(4)(b), AD/SO advised that the proposed section would be amended to improve clarity.

Proposed section 122

10.At the Chairmans' suggestion, the Administration agreed to consider using the e.pression "Remitted by the employer" instead of "Paid by the employer" in proposed section 122(1)(a) and (b) in order to avoid ambiguity.

Proposed section 123

11.The Chairman requested further clarification on what constituted failure on the part of a participating employer to pay a mandatory contribution. He questioned whether, for example, a cheque issued by a participating employer for payment of mandatory contributions would need to be cleared before the employer could be considered as having fulfiled his statutory duties under proposed section 123(1)(a). To address the Chairmans' concern, the Administration would ascertain the legal meaning of what would constitute failure to pay a mandatory contribution.

Proposed section 124

12.At the request of the Chairman, the Senior Assistant Legal Adviser (SALA) and the Administration would, in view of the Hong Kong Bar Associations' comments earlier on, consider the appropriateness of the term enalty interest" as used in the draft Regulation and the Bill.

13.Members pointed out that specifying the percentage of penalty interest in proposed section 124(3) might be inappropriate in case the market interest rate rose substantially in a short time span. They proposed that the MPFA should be given the powers to determine the level of penalty interest. In response, the Administration agreed to move a Committee stage amendment to the relevant provision in the MPFSO to give effect to members' proposal. The Administration would also amend proposed section 124 of the draft Regulation accordingly.

Proposed section 126

14.At members' request, the Administration would consider other expressions in replace of "have been taken" in the English version and " " in the Chinese version of proposed section 126(8) to improve the drafting.

Proposed section 129

15.At the Chairmans' suggestion, the Administration would consider using ayment records" instead of ay-slips" in proposed section 129 in order to give greater flexibility to a participating employer in providing the employees with information about remittance of monthly MPF contributions to the trustee.

Proposed section 130

16.At a member' request, the Administration would add a provision under the proposed section to the effect that a participating employer' failure without reasonable excuse to respond to the employee" inquiries about MPF contributions made or required to be made by the employer in respect of the employee, would be liable to a fine to be imposed by the MPFA.

Proposed section 131

17.The Chairman pointed out that the proposed requirement under section 131(1)(a) and (b) might lead to abuse as a self-employed person would merely be required to notify the approved trustee of a change in the date of birth but there was no requirement for producing proof to substantiate the change. In response, the Administration and SALA would examine whether the proposed section would need to be amended.

II.Any other business

18.The Chairman reminded members that the next meeting would be held at 2:30 pm on the same day.

19.The meeting ended at 12:40 pm.

Provisional Legislative Council Secretariat
2 March 1998