From 1 November 2012, employees enrolled in a Mandatory Provident Fund Scheme (“MPF Scheme”) in Hong Kong have the option of transferring the accrued benefits attributable to their own contributions under their MPF accounts to an MPF Scheme of their own choice once a year. Known as the Employee Choice Arrangement (“ECA”), it is intended to protect employees’ interests better and allow for fee reductions by trustees. Whilst employees can opt to transfer the accrued benefits derived from their own contributions to a new MPF Scheme, there is no requirement to do so. If they exercise this option, the whole transfer process will generally take six to eight weeks to complete.
Prior to the launch of the ECA, employees must have been enrolled in an MPF Scheme or an exempt pension fund scheme (normally known as the Occupational Retirement Scheme) of the employer’s choice during the first 60 days of their employment. However, an employee is exempted from being enrolled in an MPF Scheme if he/she is working in Hong Kong under an employment visa and either he/she is granted the right to stay in Hong Kong for less than 13 months, or he/she is enrolled in an overseas pension scheme.
In Hong Kong, all MPF Schemes are managed under trusts governed by the laws of Hong Kong. All MPF Schemes are defined contribution plans. There are two types of contributions to an MPF Scheme, namely, mandatory contributions and voluntary contributions. Under the law, both the employer and employee are each required to contribute 5% of the employee’s monthly income to the employee’s MPF account each month, with the monthly mandatory contribution amount capped at HK$1,250 (equivalent to approximately EUR 125). Any contributions made over and above the mandatory contribution amounts are considered as voluntary contributions and are entirely optional.
Under the law, an employer who, without reasonable excuse, fails to enrol its employee in an MPF Scheme commits a criminal offence and is liable, on conviction, to a fine of up to HK$350,000 (equivalent to approximately EUR 35,000) and to imprisonment for up to three years. If the offence consists of a failure by the employer to make contributions to an MPF Scheme, the employer is liable to pay a daily penalty of up to HK$500 (equivalent to approximately EUR 50) for each day the offence continues. The law expressly provides that an employer does not have a reasonable excuse for failing to comply, where the employee is at fault for not being a registered member of the scheme.
Aside from a fine, an employer who breaches the law can also be ordered to pay the contributions in arrears as well as surcharges to the employee. The Hong Kong MPF Scheme Authority is taking an active role in prosecuting those who fail to comply with the legal requirements.