MSO and the CPF Annual Limit

Posted on December 31, 2019

The short answer: The 2% additional MSO contribution to your Medisave counts towards your CPF Annual Limit, as it's a mandatory contribution for public sector employees. You must factor it in when deciding how much in voluntary contributions you can make to your CPF acounts for the calendar year.

The long answer: well...

MSO

The Medisave-cum-Subsidised Outpatient (MSO) scheme is one of the medical benefits schemes in the Singapore public sector, and is part of the current benefits package for many public sector employees.

In 1994, with the launch of Medishield Plus several years after the introduction of Medishield, the civil service introduced the MSO scheme to replace the Comprehensive Co-payment Scheme (CCS). Inpatient medical benefits were removed in favour of an additional 1% Medisave contribution (that you're expected to spend on the new Medishield/Plus), while outpatient benefits had an annual cap applied. (See Ministerial Statement by the Minister of Health on 17 January 1994, from the National Archives of Singapore.)

In 2013, the outpatient subsidy cap was raised from $350 to $500, together with other smaller changes.

From 2015, the additional Medisave contribution was revised from 1% to 2%, this time related to the replacement of Medishield with Medishield Life in late 2015. (See Press Release - Civil Service reviews medical benefit - 4 July 2014 (archive.today link) from PSD.)

The 2% additional Medisave contribution is capped with some specific parameters: up to $140/month on Ordinary Wage (OW), and up to 5x that or $700 on Additional Wage (AW), for a total of $2,380 per calendar year. These are rather unexpected numbers that I had to check several times, because when compared with the CPF Annual Limit, it's also a 17-month annual cap but it's based off a cap of $7,000/month instead of $6,000/month.

Another interesting thing is that if you don't use your outpatient subsidy at all, you can get whatever's unused from the first $350 of the subsidy cap credited to your Medisave account as well, for a maximum of $2,730 per calendar year.

CPF Annual Limit

Ok, so why the heck am I looking at public sector medical benefits?

As part of my year-end personal finance planning for the ending tax year, I was trying to figure out whether these MSO contributions would affect the 'available space' for voluntary CPF contributions under the CPF Annual Limit.

Basically, the Annual Limit is the mechanism to limit the amount of voluntary contributions (VC) that can be made to any individual's CPF accounts within a calendar year. Mandatory contributions (MC), as limited by the Ordinary Wage (OW) and Additional Wage (AW) ceilings, are always counted first, then all VC is added on top of it, and any part of the VC that pushes the total contributions over the Annual Limit will be rejected and refunded at the start of the next calendar year.

MSO and the Annual Limit

It all boils down to, are MSO contributions mandatory or voluntary?

There's simply not very much on the internet about the MSO scheme, apart from the Career@Gov Benefits page.

The CPF Board's website, which you would expect to be authoritative on all CPF matters, more or less only has MSO appear twice -- once on a FAQ discussing the intricacies of government medical benefits schemes interacting with the Basic Healthcare Sum, and another time on RF/Form 40G "Refund CPF Contributions Paid In Error (Ministry/Statutory Board)". There's no other self-help to be found there unless I call or write to CPFB.

If you try to search the site, Google will point you towards the Additional MediSave Contribution Scheme (AMCS) page -- this looks similar, in that it's related to implementing a Portable Medical Benefits Scheme and has an identical $2,730 cap, except that it's explicitly for private sector employers only. AMCS is explicitly noted as not counting towards the Annual Limit though, which is strange.

The last thing I tried was the "check allowable contribution" feature as part of the e-Cashier service for voluntary contributions, and after matching it against my contribution history for the year, found that the MSO contributions seem to count against my Annual Limit. But why?

Legislation for MSO scheme

I am definitely not a lawyer, but reading legalese is like a lot like reading code, so let's take a layman's look at what it says...

The CPF originates from the Central Provident Fund Act (CPF Act).

• section 7(1) - every employer must pay employee contributions according to the First Schedule, unless exempted (section 69) or otherwise regulated (section 77)
• First Schedule paragraph 1 - various contribution rates for age group and Permanent Residency
• First Schedule paragraph 2 - describes the AW ceiling and permitted ways to compute it
• First Schedule paragraph 3 - combining AW ceiling from multiple related employers
• First Schedule paragraph 4 - making up shortfall in contribution on AW
• First Schedule paragraph 4A - OW ceiling is defined
• First Schedule paragraph 5 - mostly definitions and mechanics, with some notable ones:
  • (d) AW for paragraph 7 employees are defined in First to Third Schedules of the regulations
  • (da) Annual Limit is defined
• First Schedule paragraph 6 - paragraph 1 shall not apply to employees of aided schools (except independent schools) and the whole list of statutory boards
• First Schedule paragraph 7 - contribution rates for employees of the Government, statutory bodies and aided schools (except independent schools) shall follow the Central Provident Fund (Public Sector Employees) Regulations 2011, as well as paragraph 2-4 of this schedule

Central Provident Fund (Public Sector Employees) Regulations 2011

• paragraph 4 - contribution rates for employees on non-pensionable service shall follow the Second Schedule
• Second Schedule paragraph 1-7 - refers to the CPF Act's First Schedule paragraphs 2, 3, 4, and defines the various contribution rates for age group, Permanent Residency, civil servant vs statutory board/aided schools
• Second Schedule paragraph 12 - OW ceiling is defined
• Second Schedule paragraph 13(1A) - for MSO scheme, "the employer must pay" 2% of OW and AW, subject to various minimums and special cases for low-wage employees
• Second Schedule paragraph 13(2) - for MSO scheme, unused balance of first $350 of outpatient medical subsidy if still employed on 31 Dec
• Second Schedule paragraph 13(3) - 2% on OW is limited to OW of $7,000
• Second Schedule paragraph 13(3A) - 2% on AW is limited to AW of the lower of $35,000 or 5 times your actual OW
• Second Schedule paragraph 13(3B) - AW ceiling to be recomputed
• Second Schedule paragraph 13(5) - the 2% is employer contribution, not employee contribution
• Second Schedule paragraph 14(d) - AW defined

It seems a reasonable guess that since the 2% is defined as "must pay", it's a mandatory contribution.

Curiously, this particular set of regulations don't seem to specify Medisave as the destination for the 2%, despite doing so for the first $350 subsidy crediting.

Legislation for voluntary contributions

It is exceedingly boring to investigate this part in similar blow-by-blow format, because the implementation of VC is even more convoluted than the MSO scheme stuff, but basically:

• Annual Limit is compared against sum of mandatory contributions and voluntary contributions
• Voluntary contributions is pretty much what you expect, except the first $2,730 of employer voluntary contributions specifically to Medisave are not counted (the AMCS carve-out)
• If Annual Limit is exceeded, CPF Board can refund excess voluntary contributions
• There are no provisions for refunds of mandatory contributions

The CPF Board webpages and FAQs are literally very correct -- describe Annual Limit, describe how excess VC is refunded, stop there.

References:

• CPF Act section 13B
• CPF Act section 75D
• Central Provident Fund (Voluntary Contributions) Regulations 2011

Misc things

Apart from learning that you definitely can exceed Annual Limit just by mandatory contributions if you have more than one employer in the year, I learnt some other interesting things too:

If you are employed by more than one employer and total wages exceed the monthly OW ceiling, you can apply to limit your share of contributions on OW. The employers will still pay their share, but I guess your employee contribution will be a bit less? This is probably from Central Provident Fund Rules paragraph 8 though that looks a bit broader than the FAQ suggests.

If you have related employers, they can apply to combine AW ceilings with your consent.

There's an interesting list of exemptions in the Central Provident Fund (Exemption) Order 2018, including... some specific sort of employees of the Seventh-Day Adventists?

Disclaimer

Any views/errors here are my own (though I've tried not to express much of a view in this post), and all information here is derived from publicly available information.