Hong Kong Proposed Sickness, Infury and Death Benefit Schome
Note by the United Kingdom Government Agtuary's Department on some aspects of the proposals
Coverage of Schome
1. The proposed scheme is unique, no far as we are aware, in that membership will depend on the exercise of options by both the employee and his employer. An employee will not become a member of the scheme unlesa:
(1) he elects to contribute;
and
(ii) his employer has not contracted-out.
We understand the reasons that have led to the adoption of a scheme that no-one need join unless he wishes, but we wonder if sufficient thought has been given to the problems raised by the proposed right of employers to contract out. One can see that employers who already provide benefits for their employees would not wish to pay contributions towards similar benefits from another scheme. It would seem probable, however, that, even if contracting-out were not allowed, few employees for whom such benefits were already provided would wish to join the Government acheme, so that the extra burden on their employers would be small unless employers were charged a payroll tax (ese paragraphs 5 to 7 below).
2.
If employers are to be allowed to contract out, two main problems arise. The first is that there would need to be Government supervision both by the rules of the schemes operated by contracted out employers and of the finances of the scheme. Since retirement benefits might have to be paid many years after
the member left the employment concerned, it would seem sasential for the contracted out schemes to be funded to an adequate level, and this would presum- ably require actuarial certification of the adequacy of the scheme's resources. Provision might be needed to ensure that funds continued in being if the employer ceased to trade or was no longer contracted out. Experience has shown that contracting out involves a great deal of administrative effort if effective supervision is to be maintained.
3. The other problem is that of transfer between contracted out employment and other employment. It is already envisaged that when an employee transfers to the Government achame a lump sum payment might be made from the contracted out
scheme. It would also be necessary to consider whether any payment was necessary
to a contracted out scheme that took over an employee previously in the Government
scheme.