Listen to Audio of this topic (Cantonese only)
MPF and Occupational Retirement Schemes (ORS)
The Occupation Retirement Scheme (ORS) was the retirement benefits scheme in force before the MPF was enacted. Employers continuing under the ORS must give employees a one-off choice on which scheme they wish to join. The ORS is governed by the Occupational Retirement Scheme Ordinance (Cap. 426) (the “Ordinance”).
There are two types of ORS – those which have been exempted under section 7 of the Ordinance and those which are not exempted. If the ORS scheme is exempted, the employer must set up for both MPF and ORS scheme until the employee opts for either one of the options within the first 30 days of employment. If the ORS scheme is not exempted, it can only be provided in addition to the MPF scheme.
What are the main differences between the two schemes?
An ORS is set up voluntarily by employers. It is governed by rules which determine the major aspects of the scheme, including: the vesting of the scheme’s benefits, retirement age, eligibility, the amount of contributions, and the bearer of administration charges. These governing rules are drawn up by the individual employers. Under the MPF scheme, these areas are restricted by the Mandatory Provident Fund Schemes Ordinance (Cap.485).
Under the ORS, the withdrawal of benefits usually arises upon termination of the employment. It is also common for the employer to opt for a vesting scale based upon the years of service: e.g. 30% of accrued benefits after three years and 100% after 10 years. The scheme and investment portfolio is also chosen by the employer under the ORS.
If an MPF-exempted ORS scheme was opted for after 1 December 2000, a minimum MPF benefit (MMB) is required to be transferred from the ORS account to the MPF account upon termination of employment. This must be the lesser of the following:
- The benefits derived from the employee’s contributions + the benefits derived from the employer’s contributions under the vesting scale; or
- The final average monthly relevant income (capped at $25,000) x years of post-MPF service x 1.2
For details on how to calculate the MMB, please refer to the MPFA website.
What is the procedure for applying for an ORS?
Applications for an ORS must be made within three months after the employer has entered into contract for registration or exemption from the Mandatory Provident Fund Schemes Authority (MPFA).
The application forms can be downloaded from the MPFA website.
The ORS also requires that an actuary certificate be issued regarding any arrangement under the scheme under Schedule 2 of the Ordinance.