On Nov. 29, 2024, HK LAB said HK GVT gazetted the commencement notice for employment and retirement schemes legislation abolishing MPF system offsetting.
The notice appoints May 1, 2025 as the effective date for Employment and retirement schemes legislation (offsetting arrangement) (amendment) ordinance 2022.
The amendment ordinance abolishes the use of accrued benefits from employers' mandatory contribution to offset severance payment (SP), long service payment (LSP).
Employers may continue using accrued benefits from voluntary contributions and gratuities based on service length for offsetting severance and long service payment.
For employment started before transition date, employers can use MPF contributions to offset severance, long service payment for employment period before transition date.
Changes apply to occupational retirement schemes under occupational retirement schemes ordinance, school provident funds, and overseas schemes exempt from MPF.
25-year subsidy scheme from May 1, 2025, to share employers' SP/LSP expenses.
Commencement notice will be tabled at the HK PRL on Dec. 4 for negative vetting.
On Feb. 11, HK PRL gazetted amendment on offsetting arrangement.
HK PRL gazetted the employment and retirement schemes legislation (offsetting arrangement) (amendment) bill 2022, following abolition of offsetting arrangement.
Offsetting
Currently, employers can use accrued benefits of employers’ mandatory contributions (ERMC) under MPF system to offset severance payments and long service payments.
Employers’ contributions to other occupational retirement schemes can also be used.
Chief executive proposed to abolish this arrangement to improve employee protection.
To give effect to the proposal, it is necessary to make amendments to eight pieces of ordinance/subsidiary legislation, which currently provide for offsetting arrangement.
Effectiveness
First reading will be held on Feb. 23, 2022.
Mar. 2022 HK GVT
On Mar. 7, 2022, HK GVT uploaded employment and retirement schemes legislation (offsetting arrangement) (amendment) bill 2022 on the HK e-legislation website.
Jun. 9, 2022 Amendment Implementation
On Jun. 9, 2022, HK MPFA said abolition of offsetting arrangement has been approved.
The abolition is applicable to MPF, as well as the occupational retirement schemes.
HK MPFA has built the functionalities on the eMPF platform to support the change.
Jun. 26, 2022 Investment Returns
On Jun. 26, 2022, HK MPFA issued blog post on the abolition of offsetting arrangement and eMPF platform, to provide better retirement protection for scheme members.
HK MPFA is actively encouraging employers and scheme members to make additional voluntary contributions in order to enhance employees’ retirement reserves.
Average fund expense ratios dropped from 2.1% in 2007 to 1.39% as of May 2022.
In addition, the eMPF platform will further reduce administration costs significantly.
Dec. 2022 Legislation
On Dec. 23, 2022, HK LAB said that HK PRL has passed the abolition of using the accrued benefits of employers’ mandatory contributions under the MPF system.
HK GVT will implement the abolition in tandem with the full implementation of the eMPF platform of HK MPFA not later than 2025.
Apr. 2023 Arrangement Finalized
On Apr. 28, 2023, HK MPFA said the abolition of offsetting severance payments/long service payments under employment ordinance will be effective from May 1, 2025.
May 2023 Calculation Tool
On May 1, 2023, HK LAB introduced a calculation tool, EasyCal to assist employers and employees to calculate severance payments (SP) and long service payments (LSP).
HK GVT will introduce a 25-year subsidy scheme to share out the expenses on SP/LSP.
In Oct. 2024, HK MPFA discussed plans for full portability of benefits, see #231318.
Nov. 2024 Commencement
On Nov. 29, 2024, HK LAB said HK GVT gazetted the commencement notice for employment and retirement schemes legislation abolishing MPF system offsetting.
The notice appoints May 1, 2025 as the effective date for Employment and retirement schemes legislation (offsetting arrangement) (amendment) ordinance 2022.
The amendment ordinance abolishes the use of accrued benefits from employers' mandatory contribution to offset severance payment (SP), long service payment (LSP).
Employers may continue using accrued benefits from voluntary contributions and gratuities based on service length for offsetting severance and long service payment.
For employment started before transition date, employers can use MPF contributions to offset severance, long service payment for employment period before transition date.
Changes apply to occupational retirement schemes under occupational retirement schemes ordinance, school provident funds, and overseas schemes exempt from MPF.
25-year subsidy scheme from May 1, 2025, to share employers' SP/LSP expenses.
Commencement notice will be tabled at the HK PRL on Dec. 4 for negative vetting.
Regulators
HK GVT; HK LAB; HK MPFA; HK PRL
Entity Types
Corp; Pension
Reference
PR, OG LN 173 of 2024, 11/29/2024; PR 5/1/2023; PR 4/28/2023; Ntc 12/23/2022; Blog 6/26/2022; PR 6/9/2022; Bill 3/7/2022; Bill LD OPD/14-2/1(C), 2/11/2022
