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More Stringent Requirements for Hong Kong Occupational Retirement Schemes Introduced

  • Hong Kong
  • Employee benefits
  • Employment law

06-07-2020

The Hong Kong Legislative Council has passed the Occupational Retirement Schemes (Amendment) Ordinance 2020 on 17 June 2020, which has been gazetted and came into operation on 26 June 2020.

The Occupational Retirement Schemes Ordinance (“ORSO”) provides for a registration system for Occupational Retirement Schemes voluntarily set up by employers under the ORSO to ensure that such schemes are properly regulated. Overseas schemes could be registered as exempt.

The recent amendments were introduced as a response to suspected abuses where investment products were offered via ORSO schemes to non-employees for general investment purposes. This was used to circumvent regulations for collective investment schemes in Hong Kong.

The main feature of the amendment is the new requirement that an ORSO scheme must be employment-based and limit its membership to employees, ex-employees and their beneficiaries, and independent contractors who have performed service for the employer for not less than four continuous years. Schemes which do not fulfill this requirement are no longer subject to the ORSO and instead will be subject to the regulatory regime for collective investment schemes, including the Securities and Futures Ordinance.

The amendment ordinance also limits the routes on which schemes may apply to become ORSO Exempted. Previously, a scheme could be exempted if not more than 10% or 50 of the scheme members were Hong Kong permanent ID Card holders. This allowed true retirement schemes from outside Hong Kong, for example those operated by multinational employers, to be offered to Hong Kong staff. Under the new rules, schemes must now either be registered under the ORSO or be regulated by a competent overseas authority to be exempted from the regulatory requirements under the Securities and Futures Ordinance.

New reporting obligations have been introduced in the annual return and annual statement to be submitted to the Registrar of ORSO schemes where employers maintaining ORSO schemes are now required to confirm that they have fulfilled the legal requirements under the ORSO.

The Registrar of ORSO Schemes has now been vested with the power to inspect, investigate and enforce the revised ORSO regulations and new offences have been introduced for non-compliance with the Registrar’s requirements.

Employers maintaining ORSO schemes should be aware of the new reporting requirements when they make their next annual statement. Employers should also review the membership of their ORSO schemes to ensure compliance with the new requirements.