Employee Choice Nears: BCT Group Warns of Rising Admin Burden

In December 2011, BCT Group’s managing director and CEO (劉嘉時) told the Economic Digest that the MPF Employee Choice Arrangement would pile heavy paperwork onto employers and trustees. The group had already started hiring front- and back-office staff in the second half of the year to cope. Systems were ready, but she warned that excessive sales-procedure rules could backfire and push costs onto members.

Will the Employee Choice Arrangement increase admin work for employers and trustees?

Yes. Switching trustees under the Employee Choice Arrangement generates enormous paperwork — errors in forms bounce back and forth, wasting time, while trustees must overhaul documents and systems. BCT Group had passed the MPFA’s on-site inspections and systems tests, yet still needed to hire staff to handle the coming data traffic, saying cost increases were inevitable and could only be kept reasonable.

Form Errors Hurt SMEs Most

The biggest impact, Liu said, was processing the flood of forms returned by employers and trustees. “There are a great many forms to fill in,” she said, and for SMEs with limited resources, a mistake that gets sent back is costly in time and effort. Trustees would also need to update their documents and systems substantially for member switching. The MPFA had carried out multiple on-site inspections, and the group’s systems tests were complete.

Fears of Over-Correcting Sales Procedures

The industry’s biggest concern was the revision of sales procedures. Citing banks’ distribution of government bonds after the Lehman collapse — where sales took anywhere from half an hour to a full hour — Liu said she hoped MPF practitioners would not be reduced to “salespeople chasing quotas.”

She stressed that MPF differs fundamentally from retail funds, particularly in the range of investable products. If too many checkpoints were imposed, other costs would rise even as management fees fell, and “the costs will ultimately be passed on to members — only consumers suffer.”

Reform Welcome, If Reasonable and Workable

Liu said the industry would welcome any reform that was reasonable, workable and consistent with regulatory principles, and she was glad to contribute to consultations on the Code of Conduct.

The Employee Choice Arrangement was expected to launch on 1 November 2012, letting employees transfer accrued benefits from current-employment mandatory contributions at least once a year. Members planning a switch can consult the MPFA’s education hub and ask their current trustee about procedures and charges.