Provisional Legislative Council

PLC Paper No. CB(1)1072
(These minutes have been
seen by the Administration)


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

Minutes of the meeting held on
Wednesday, 14 January 1998, at 8:30 am
in Conference Room A 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
Dr Hon TANG Siu-tong, 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 Ambrose LAU Hon-chuen, JP
Hon Paul CHENG Ming-fun, 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

Mr Duncan BERRY
Senior Assistant Law Draftsman
Department of Justice

Miss Shandy LIU
Government Counsel
Law Drafting Division
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 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 147

2.The Assistant Director/Scheme Operations (AD/SO) advised that "must lodge with the Authority" would be amended to "must lodge with the approved trustee" in proposed section 147(1) in order to rectify a drafting error.

3.In reply to a member's enquiry, AD/SO confirmed that a scheme member's permanent departure from Hong Kong would be an acceptable reason under the proposed section for withdrawal of accrued benefits before reaching the retirement age. In order to prevent abuse, it was stipulated in proposed subsection (3) that permanent departure from Hong Kong could only be used once as a reason for early withdrawal of benefits. AD/SO further explained that the arrangement under the proposed section was a balanced approach having regard to diverse views on whether early withdrawal should be permitted.

Proposed section 148

4.Elaborating on the proposed section, AD/SO said that a scheme member's total incapacity would be an acceptable reason for withdrawal of the scheme member's accrued benefits before retirement age. In this connection, the definition of "total incapacity" was adopted from a similar definition in the Employment Ordinance.

5.In reply to members' enquiry on measures to prevent abuse of the right to early withdrawal of accrued MPF benefits on grounds of total incapacity, AD/SO clarified that the scheme member concerned would be required to produce a certificate issued by a registered medical practitioner certifying that he/she was permanently unfit to perform the work he/she was performing immediately before becoming totally incapacitated. Moreover, the scheme member would also be required to produce a letter from his last employer certifying that the contract of employment with the scheme member had been terminated.

Proposed section 150

6.In reply to members, AD/SO confirmed that if there were any outstanding MPF contributions in relation to a scheme member's account at the time when the scheme member lodged a claim for payment of accrued benefits, the trustee would be allowed a longer period of 60 days (instead of 30 days if there were no outstanding contributions) for effecting the payment of accrued benefits. The longer period allowed was to enable the trustee to try to recover the outstanding contributions plus contribution surcharge (formerly known as "penalty interest"), if any, before effecting the payment of accrued benefits.

Proposed section 152

7.Some members questioned the reasons for not specifying under the proposed section a period within which the trustee was required to pay to a scheme member the outstanding contributions or contribution surcharge recovered after the scheme member had withdrawn the accrued benefits. In response, AD/SO explained that the trustee was required to pay the outstanding contributions recovered 弌s soon as practicable" because flexibility had to be provided for cases in which the scheme member concerned had left Hong Kong or where there were great difficulties in locating the scheme member.

Proposed section 154

8.Responding to members' enquiry on the proposed section, AD/SO clarified that an approved trustee would not be allowed to effect payment of accrued MPF benefits to scheme members if the MPFA had directed a special audit or investigation be conducted on the registered scheme concerned. The purpose of the proposed restriction was to allow time for assessment of the loss in scheme assets. Handling of withdrawal cases could be resumed by the approved trustee after completion of the valuation exercise which would took one or two weeks and results of the valuation would be taken into account in payments of accrued benefits.

9.Some members were concerned about channels available to scheme members for appealing against the result of valuation. In this connection, AD/SO confirmed that the valuation result would be subject to the approval of the MFPA which could appoint another auditor to conduct a valuation exercise if necessary.

10.Members considered that the MPFA should be given the discretion to allow an approved trustee to continue processing withdrawal cases even though the MPF scheme concerned was under investigation if the approved trustee was not involved in any fraudulent practice. In response, the Administration agreed to amend proposed section 154(1) to the effect that with the consent of the MPFA, payment of accrued benefits could still be made even though the MPF scheme was under investigation.

Proposed sections 157 and 158

11.On proposed sections 157 and 158, AD/SO explained that the two usual ways to handle unclaimed benefits in a retirement scheme were either to leave such unclaimed benefits in the scheme or to transfer the unclaimed benefits to the government's treasury after a prescribed period. The proposed sections had adopted the former approach in order to streamline administrative procedures.

12.In response to a member's suggestion on centralizing unclaimed benefits under one account in a master trust scheme for easy administration, AD/SO cautioned that this approach would lead to an unfair competitive edge enjoyed by the master trust scheme designated for depositing the unclaimed benefits.

13.At the Chairman's request, the Administration would amend the proposed sections to specify in clearer terms that the unclaimed benefits in a MPF scheme would remain to be the accrued benefits of the scheme members concerned.

Proposed section 160

14.Members expressed concern about the complicated definition on "gross market value" in proposed subsection (2), in particular with respect to the exact meaning of the terms "GMV" and "GVA". In response, the Administration agreed to amend the proposed subsection to improve clarity.

Proposed section 177

15.In reply to members' enquiry on the criteria to be used by the MPFA in assessing an application for winding up of an employer sponsored scheme, AD/SO advised that the MPFA would examine the reasons for the proposed winding up, the arrangement for scheme members to transfer to another registered scheme, and measures to ensure that the interests of scheme members would not be adversely affected by the proposed winding up.

16.Members considered it imperative that there should not be any time gap between the cessation of the employer sponsored scheme which was being wound up voluntarily and the transfer of the scheme members' accrued benefits to a new scheme. In response to members' concern, the Administration would examine whether proposed subsection (3) should be amended to specify clearly that the winding up proposal had to set out the proposed arrangements in detail.

Proposed section 180

17.At the suggestion of a member, the Administration would amend proposed subsection (2) to the effect that the liquidator of an employer sponsored scheme which was being wound up voluntarily was required to give a notice on the winding up to the participating employer and scheme members "within 7 days" instead of "as soon as practicable" as presently proposed.

Proposed sections 182 and 185

18.In view of the long time and heavy costs likely to be incurred in instituting winding up proceedings, members considered that employer sponsored MPF schemes which were financially sound but which had to wind up voluntarily for reasons such as company mergers or acquisitions should be subject to a much simpler set of proceedings than as presently proposed in Part XIV of the draft Regulation. The Chairman opined that the voluntary liquidation of financially sound employer sponsored MPF schemes could be considered as a mass transfer of accounts from one MPF scheme to another MPF scheme and the MPFA should be empowered to decide on the most appropriate mode in handling such voluntary liquidation on the merits of each case. In response, the Administration agreed to consider amendments to Part XIV of the draft Regulation to give effect to members' proposal.

19.In response to members' enquiry on costs incidental to the voluntary winding up of employer sponsored schemes, AD/SO explained that proposed section 184 of the draft Regulation stipulated that the all the costs and expenses related to the winding up of the scheme, including the fees of the liquidator, were to be borne by the participating employer of the scheme.

II.Any other business

20.The Chairman reminded members that the next meeting of the Bills Committee would be held on 17 January 1998 at 8:30 am.

21.The meeting ended at 10:30 am.

Provisional Legislative Council Secretariat
4 March 1998