MPF exam ORSO / MPF Interface question: employer pays out

Answer: D. the portion attributable to employer contributions is generally taxable to the employees

Answer: the portion attributable to employer contributions is generally taxable to the employees. Benefits not received in the prescribed circumstances (retirement, death, incapacity, termination of service) do not qualify for the salaries tax exemption, so the employer-funded portion is generally taxable.Why not the others:• the employer has to transfer the scheme assets to an MPF scheme rather than pay out: paying out liabilities is one of the two permitted ways to close a scheme, subject to its terms.• the employer may also pay out new members' minimum MPF benefits in cash at that time: new members' minimum MPF benefits must be preserved, not paid out.• all the benefits are exempt from salaries tax, as they arise from a scheme termination: termination is not one of the prescribed circumstances that give full or partial salaries tax exemption.Watch out: Assuming any payment from a retirement scheme is tax-free.Rule: Paying out on scheme termination: employer-funded portion generally taxable; new members' minimum MPF benefits preserved.Source: MPF Study Notes, Tenth Edition (June 2026; examinable from 1 Oct 2026), section 6.4 (checked 31 Oct 2026)