TNAG-0788-FCO40-992-Development-of-social-policy-in-Hong-Kong-proposed-contribut-1978 — Page 35

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Hong Kong - Proposed Sickness. Infury and Death Benefit Scheme

ty Note by the United Kingdom Government Actuary's Department

on some aspects of the propisala

Coverage of Scheme

1. The proposed scheme is unique, so 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 achume uniesa:

(1) he elects to contribute;

and

(11) his employer has not contracted-out.

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 probleus raised by the proposed right of suployers 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 scheme, so that the extra burden on their employers would be small unless employers were charged z payroll tax (see 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 bʊtn bý 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 seum sasential for the

contracted out schemes to be funded to an adequate level, and this would premLING-

ably require actuarial certification of the adequacy of the scheme's resources.

Provision might be needed to ensure that funda 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 schase 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.