Provisional Legislative Council

PLC Paper No. CB(1)1071
(These minutes have been
seen by the Administration)


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

Minutes of the meeting held on
Tuesday, 13 January 1998, at 2:30 pm
in Chamber of the Legislative Council Building

Members present.:

Hon Ronald ARCULLI, JP (Chairman)
Hon WONG Siu-yee
Hon LEE Kai-ming
Hon Mrs Peggy LAM, JP
Hon MA Fung-kwok
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon NGAN Kam-chuen

Members absent.:

Dr Hon LAW Cheung-kwok (Deputy Chairman)
Hon James TIEN Pei-chun, JP
Hon HO Sai-chu, JP
Hon Henry WU
Dr Hon Mrs TSO WONG Man-yin
Hon YEUNG Yiu-chung
Hon Ambrose LAU Hon-chuen, JP
Hon Paul CHENG Ming-fun, JP
Dr Hon TANG Siu-tong, JP
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

Staff in attendance.:

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 sections 133 and 134

2.Elaborating on proposed section 133, the Assistant Director/Scheme Operations (AD/SO) advised that a member of an employer sponsored MPF scheme who ceased to be an employee of the participating employer had to elect to transfer his accrued benefits to another registered MPF scheme of his own choice in accordance with proposed section 133(1). The scheme member concerned had a three-month period after cessation of employment with the current employer for notifying the transferee trustee or his new employer of his choice with respect to the transfer of accrued benefits.

3.As regards proposed section 133(3), the Chairman suggested that if a scheme member was required to notify both the transferee trustee and the new employer with respect to his choice on the transfer of accrued benefits, proposed section 133(4), which required the new employer to give written notice to the transferee trustee regarding the employee's choice, would be unnecessary. In response, AD/SO explained that the drafting of proposed section 133(3) and (4) was to provide greater flexibility but the Administration would further examine the Chairman's suggestion.

4.Some members considered that the three-month period within which an employee had to decide on the transfer of accrued MPF benefits upon a change of employment was inadequate, given that an employer would have 60 days' grace period to arrange MPF coverage for new employees. In this regard, the Administration considered the three-month period adequate and cautioned that a longer notification period would increase the chance of employees forgetting to make their choice on the transfer of accrued benefits, thus resulting in a large number of small dormant accounts in MPF schemes.

5.At the Chairman's request, the Administration would consider whether the expression "new employer", instead of "second employer", should be used in proposed sections 133 and 134 in order to improve clarity.

Proposed section 137

6.In reply to members' enquiry, AD/SO clarified that initially, two Industry Schemes would be established for the catering and construction industries. The Industry Schemes Committee to be set up would monitor the implementation of Industry Schemes and would advise on the number and coverage of such Schemes in the light of operational experience.

Proposed section 141

7.In response to members, AD/SO confirmed that it would be an offence under the principal Ordinance for a transferor trustee who failed to effect the transfer of accrued MPF benefits of a scheme member to the transferee trustee nominated by the scheme member concerned.

Proposed section 142B

8.Elaborating on proposed section 142B, AD/SO said that a transferor trustee would not be allowed to effect a transfer of benefits if MPF contributions were outstanding in relation to the scheme member's account. The purpose of the proposed restriction was to avoid the possible difficulties of tracking down the scheme member's MPF account which might have been transferred a few times before the outstanding MPF contributions were recovered. In this connection, members considered that the MPFA should have the flexibility to allow the transfer of accrued benefits in some special cases even though MPF contributions were outstanding. To address members' concern, the Administration agreed to add a proviso to proposed section 142B to the effect that unless with the consent or approval of the MPFA, an approved trustee would not be allowed to transfer the accrued benefits of a scheme member whose account had outstanding MPF contributions.

Proposed section 142C

9.AD/SO explained that a transferor trustee would not be allowed to effect the transfer of accrued MPF benefits if the MPFA had required the conduct of a special audit or investigation on the trustee in accordance with sections 30 and 32 of the principal Ordinance. The proposed restriction was required for the assessment of losses in scheme assets. Handling of transfer cases could be resumed on completion of valuation so that the losses in scheme assets could be taken into account in effecting the transfer of accrued MPF benefits.

10.In this regard, a member pointed out that in case a MPF scheme under investigation had not been involved in any fraudulent practices, the trustee concerned should be allowed to continue processing transfer cases in order to avoid unnecessary rumours that the trustee was in trouble. In response, the Administration agreed to introduce a proviso to subsection (1) to the effect that the transfer of benefits could not take place if the scheme was under investigation unless the MPFA had directed otherwise.

Proposed section 30

11.In reply to a member, AD/SO confirmed that under proposed section 30, an approved trustee had to give an undertaking to the MFPA when applying for scheme registration not to impose any fees for transferring a member's accrued benefits to another scheme, provided that the transfer of benefits was made within 12 months after the cessation of MPF contributions and the amount of accrued benefits did not exceed HK$5,000 at the time of the transfer. The member was concerned that the provisions might encourage frequent switchings between MPF schemes instead of encouraging the consolidation of small dormant accounts. In response, the Administration would review whether the proposed section could effectively reflect its original policy intent.

Other issues

12.At members' request, the Director/MPF Office (D/MPFO) agreed to provide a paper assessing the impact of past and recent financial market turmoils on retirement schemes in Hong Kong. The information would include input from service providers and general assessment by the Administration.

13.In reply to members, D/MPFO confirmed that a paper setting out the Administration's revised proposals on Capital Preservation Products would be provided for members' consideration.

II.Any other business

14.D/MPFO said that having considered members' views, the Administration had decided to defer the resumption of Second Reading debate on the Bill from 11 February 1998 to 25 February 1998. However, with this deferral, fast track procedures might be required in processing the related subsidiary legislation which would be introduced into the Provisional Legislative Council after passage of the Bill.

15.The Chairman reminded members that the next meeting would be held on 14 January 1998 at 8:30 am.

16.The meeting ended at 4:30 pm.

Provisional Legislative Council Secretariat
4 March 1998