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ORSO Plan Advisory
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Progression of ORSO
The Occupational Retirement Schemes Ordinance (ORSO) scheme is a voluntary retirement benefit offered by company aiming for staff attraction and retention in 1990s. Industry leaders established ORSO schemes to attract and retain talent.
With growing popularity of the ORSO schemes, Occupational Retirement Schemes Ordinance (ORSO) comes in to govern and ensure proper management and sustainability of them.
MPF was introduced in 2000 as a mandatory retirement scheme.
ORSO had been gradually fading away and taken over by MPF.
Since then, ORSO has either been “frozen” (stop enrolling new members) or offered as one of the choices for employees selection.
How Do ORSO Registered Schemes Qualify for MPF Exemption?
Some ORSO schemes hold a special status granted by the MPFA and are exempt from the requirements of the MPF system, allowing them to operate under the regulations established by the ORSO. All ORSO Registered Scheme must meet specific criteria set by the MPFA to be qualify for MPF Exemption:1
Employers must offer a choice between an ORSO scheme and an MPF scheme
2
The trustee must meet MPFA standards
3
Approval must be obtained from MPFA upon changes in trustees
4
Only an investment management company that meets MPFA condition(s) can be appointed as investment manager
5
Investment must meet MPFA standards
6
An application must be submitted when withdrawing an MPF Exemption Certificate
7
Employer must prominently display the exemption certificate
8
Employer must provide each member of the ORSO scheme with a copy of the exemption certificate
Two Types of ORSO Schemes
Defined Contribution SchemesOffers flexibility where retirement benefits vary directly with contributions and returns
Defined Benefit SchemesOffers guaranteed retirement benefits based on years of service and final salary
How Does ORSO Operate?
ORSO schemes follow a structured process to ensure that retirement benefits are managed and distributed effectively.Enrolment
Contribution Requirements
Vesting of Benefits
Dismissal or Redundancy
Bankruptcy of Members
Tax Deduction
ORSO Scheme Withdrawal
What is Minimum MPF Benefits?
Minimum MPF Benefits (MMB) are the accrued benefits of members who joined an ORSO scheme after the launch of the MPF system on 1 December 2000 (i.e., New scheme members). These benefits are subject to preservation, portability, and ORSO withdrawal requirements up to the MMB amount.How to Calculate MMB?
For new scheme members, MMB refers to the smaller of the following:- The member's benefits accrued and held under the ORSO scheme during employment (benefits derived from employee's contributions plus benefits from employer's contributions under the vesting scale); or
- The final average monthly relevant income (capped at $20,000 on or before 31 May 2012, $25,000 from 1 June 2012 to 31 May 2014, and $30,000 on or after 1 June 2014) × years of post-MPF service × 1.2.
Why are some employers still operating ORSO?
GUM's observations
66%
66% of respondents said they retain ORSO scheme simply because of its long history
1/4
1/4 indicated that ORSO can retain or attract new employees
10%
Only 10% of respondents offer ORSO because of its tax advantages
More GUM's Findings
Current ORSO schemes arrangement in the marketAround 50% of ORSO schemes include defined benefits elements
Are employers still opening ORSO for new entrants? 68% do not accept new enrollments
What is the membership split between ORSO and MPF?49% have less than 30% of employees enrolled in ORSO scheme
Employer Challenges in Implementing the ORSO Scheme
Admin process is the top hurdle with 25% votes
Almost ¼ of respondents said the ORSO scheme information is not transparent enough
17% of respondents think insufficient fund choice available for ORSO schemes
Is ORSO becoming the legacy in HK?
Market- In the past 20 years, the number of employers in the ORSO market has decreased by 37%, with a decline from 8,800 to 5,500, indicating a significant shift away from ORSO among employers
- 66% of respondents said they retain ORSO scheme simply because of its long history ''Organization Inertia''
- They are prioritizing resources in the rapidly growing MPF market, which is valued at $1 trillion, rather than the declining ORSO market, which is valued at $0.3 trillion. This explains the limited fund choices and functionalities offered by the ORSO platform.
GUM's Market Observation
Recent market observations indicate a trend towards the termination of guarantee funds and a shift in provider emphasis from ORSO to MPF schemes. 
Termination of Guarantee Funds
Shift in Provider Emphasis from ORSO to MPF Schemes
Market Perception of ORSO as less secure and stableORSO vs MPF
ORSO
MPF
More Flexible
More Standardized
Voluntary retirement scheme
Mandatory retirement scheme
Flexible contribution periods & due date
Contributions are due monthly by the 10th
Customized employers' & employees' contribution
Employers & employees must contribute 5% of the relevant salary, capped at $1,500
Scheme administrative charges usually borne by the employer
Scheme administrative charges usually borne by the members
Salary definitions customized by employers
Relevant salary defined as the total of all wages, salaries, leave pay, fees, commissions, bonuses, gratuities, and allowances
Flexible retirement age
Normal retirement age = 65
Offers Defined Benefit (DB) & Defined Contribution (DC) schemes
Primarily consists of Defined Contribution (DC) schemes
What can be the next steps?
1. Identifying Key Issues
- ORSO scheme review and confirm current pain points (administrative inefficiencies, cost burdens, benefits misalignment etc.)
2. Conducting a Feasibility Study
- Evaluate pros and cons of various options
- Assess legal feasibility for transferring/winding up the ORSO scheme
3. Designing Optimal Benefits
- Suggest options, design scheme rules, and select MPF providers based on feasibility study results
4. Evaluating Options
- Evaluate options for cost, effectiveness, sustainability, and stakeholder alignment, balancing interests of all parties
5. Executing the Project
- Manage the project with defined action steps and summary report and justification
6. Marketing the Benefits
- Communicate benefit changes to employees to highlight the value
Frequently Asked Questions
about ORSO Schemes1. As an employer, am I required to apply for a certificate of exemption or registration if I operate a retirement scheme?
2. How can I provide the same ORSO scheme benefits to members who are no longer eligible to remain in the original MPF exempted ORSO scheme due to scheme or company restructuring?
3. Will changing my MPF exempted ORSO registered scheme from a defined benefit scheme to a defined contribution scheme affect its MPF exemption status?
4. Are there any annual reporting obligations for an ORSO exempted scheme?
5. What are minimum MPF benefits ("MMB")?
6. Is it possible for an employer to forfeit a member's Minimum MPF Benefits (MMB) following dismissal for cause or to settle any losses caused by the member?
7. Is it possible for an employer to offset long service payments (LSP) or severance payments (SP) against ORSO contributions?
8. What details must employers provide to members of an ORSO registered scheme?
9. What information must an employer provide if they offer new eligible employees the option to choose between our MPF exempted ORSO scheme and an MPF scheme?
10. Should I notify the MPFA of termination or winding up of an ORSO registered scheme?
11. Can ORSO schemes be marketed to the public in the similar way as MPF schemes?
12. As an employee, what information about registered schemes am I entitled to obtain?
13. Can an employee withdraw all their benefits from an MPF exempted ORSO registered scheme upon termination of employment?
14. Is it possible for an employee to defer the ORSO withdrawal of their benefits upon retirement or termination of employment?
15. Can a trustee forfeit all of a member's ORSO benefits, including the minimum MPF benefits (MMB), if the member is dismissed for misconduct?
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