On 18.12.2019, Parliament passed a bill to amend certain provisions of the Employees Provident Fund Act 1991 (“EPF Act”), which will come into operation on a date to be appointed by the Minister of Finance by notification in the Gazette.

Some of these amendments involve introduction of new provisions which are, among other things, meant to ensure compliance with the obligation to contribute to the EPF and to allow individuals the right to withdraw the funds upon meeting certain conditions.

Here is a summary of some of the key changes to the EPF Act which will be coming into force soon.

 

Individuals who Fail to Pay contributions to EPF can be prevented from leaving the country

The EPF Act, prior to the amendments, provides that the chief executive officer “may make a request to the Inspector General of Police or the Director General of Immigration for any person to be prevented from leaving Malaysia without paying any moneys payable to the fund in respect of which an order of the court has been obtained.”

However, once the amendments come into operation, individuals can be prevented from leaving the country (upon issuance of a certificate by the chief executive officer) so long as the chief executive officer has reason to believe that such individuals are about to, or are likely to leave the country without paying their outstanding contributions to EPF. There is no longer a requirement for the chief executive officer to first obtain a court order for payment of outstanding monies.

In such a situation, the individual can be prevented from leaving Malaysia until they have settled the outstanding contributions or have otherwise provided security to the satisfaction of the chief executive officer.

Further, any individual who leaves the country knowing that such certificate has been issued without paying all the outstanding and due contributions commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding 6 months or to a fine not exceeding RM 2,000.00 or to both.

 

Election to transfer contributions to lawful wife

With the new amendment in place, individuals can now elect to transfer his contributions in the EPF fund into the account of another, on the condition that:

  • The individual (transferor) is a Malaysian citizen;
  • The transferor receives employer’s contribution on a monthly basis; and
  • The recipient is a lawful wife of the transferor and is a Malaysian citizen.

The rate of contribution for this purpose is set at 2% of the transferor’s total monthly contributions.

 

Earlier withdrawal of contributions in certain cases

Currently, any contribution that has been credited into the account of a member of the Fund after the member has attained the age of fifty-five years may only be withdrawn when the member attains the age of sixty years. However, the amendments seek to allow a member who has reached the age of fifty-five to withdraw from his fund all sums of money standing to his credit, provided:

  • The member is physically or mentally incapacitated from engaging in employment; or
  • The member of the Fund is not a Malaysian citizen and is about to leave Malaysia;

 

Commentary

The two notable changes to the law will see the tightening of the enforcement of the EPF Act (e.g. the obligation to make monthly contributions), and the expansion of the number of individuals who can benefit from the EPF fund (widely understood to apply to housewives).  However, the right to transfer contributions is very limited in scope in that it is only applicable to “lawful wife / wives” – it does not allow a wife to transfer her contributions to her husband on similar terms, nor does it allow transfer of contributions to other types of dependent relationships (e.g. child to parent).

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This article was written by Donovan Cheah (Partner) and Adryenne Lim (Legal Executive). Donovan has been named as a recommended lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018 and 2019, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work. 

Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory.  Have a question? Please contact us.

 

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