Commonwealth Numbered Regulations - Explanatory Statements

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OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1992 NO.223

EXPLANATORY STATEMENT

STATUTORY RULES 1992 No. 223

ISSUED BY THE AUTHORITY OF THE TREASURER

Occupational Superannuation Standards Act 1987

Occupational Superannuation Standards Regulations (Amendment)

The Occupational Superannuation Standards Act 1987 (the Act) provides operating standards and other relevant conditions with which superannuation funds, approved deposit funds and pooled superannuation trusts are required to comply in order to be eligible for taxation concessions under the Income Tax Assessment Act 1936.

Section 22 of the Act provides that the Governor-General may make Regulations for the purposes of the Act.

The proposed regulations amend the Occupational Superannuation Standards Regulations (the Principal Regulations) to give effect to the Treasurer's Budget announcement of 20 August 1991 that the Government would introduce legislation effective from 1 July 1992 to implement a Superannuation Guarantee arrangement. The introduction of the Superannuation Guarantee (Administration) Act 1992 requires changes to be made to the operational standards to allow superannuation funds to accept superannuation guarantee moneys.

The principal regulations need to be amended to allow superannuation funds to accept contributions made by employers under Superannuation Guarantee arrangements, notwithstanding any otherwise conflicting provisions of the existing regulations, and to require that those contributions vest in employees immediately.

The proposed regulations also place responsibility on the trustees to obtain and provide employers with specific information, including regular actuarial assessments of the solvency of the fund, as well as keeping employers and the Insurance and Superannuation Commission informed as to the status of the fund.

The proposed regulations have been developed in consultation with representatives of the superannuation industry, and related professional organisations.

The proposed regulations are described in detail in the attachment.

The proposed regulations commence on the commencement of the Superannuation Guarantee (Administration) Act 1992.

ATTACHMENT

Occupational Superannuation Standards Regulations (Amendment)

Clause 1

Clause 1.1 provides that the regulations will commence on the commencement of the Superannuation Guarantee (Administration) Act 1992.

Clause 2

Clause 2.1 provides that the Occupational Superannuation Standards Regulations (the Principal Regulations) are amended to reflect the Superannuation Guarantee arrangements announced by the Government.

Clause 3

Clauses 3.1, 3.2, 3.3 and 3.4 insert and amend definitions of a number of words and expressions for the purpose of the regulations.

Clause 3.5 will correct a cross-referencing error in paragraph 3(3)(a) of the principal regulations.

Clause 3.6 provides that contributions to a superannuation fund by an employer of a member of the fund includes any shortfall component in respect of the member and any other contributions to the fund made by or on behalf of a person, other than the member in respect of the member. This amendment will ensure that any contributions in relation to Superannuation Guarantee arrangements are recognised as employer sponsored contributions.

Clause 4

Clause 4.1 amends paragraph 5AA(2)(b) of the principal regulations to allow contributions, including a shortfall component, to be made to a new fund or arrangement on behalf of person, if that person is not working full-time or part-time where the contribution is in respect of Superannuation Guarantee arrangements. This amendment will allow contributions to a superannuation fund or crediting of a shortfall component to be made in respect of a person's employment or previous employment to be accepted by a superannuation fund.

Clause 4.2 amends paragraph 5AA(3)(a) of the principal regulations to allow contributions, including a shortfall component, to be made to a fund of which a person is already an existing member of the fund if the contribution is in respect of the Superannuation Guarantee arrangements. This is to make provision for where a person is not working full-time or part-time and the contributions to the superannuation fund are made in respect of a member's previous employment in respect of the Superannuation Guarantee Charge.

Clause 5

Clause 5.1 provides that benefits (other than death and disability benefits) vest in a member on the day of accrual if the benefits are in relation to the minimum amounts to be contributed under the Superannuation Guarantee arrangements or in accordance with an agreement or award. This provision will ensure that superannuation moneys are built up in the name of the member and cannot be withheld from him/her at the discretion of the employer or the trustee of a fund.

Clause 5.2 is a consequential cross-referencing amendment.

Clause 6

Clause 6.1 inserts a new regulation in relation to a vesting standard. This standard places a limitation on increases that a fund can provide to members and does not apply to defined benefit superannuation funds or superannuation funds which are Government guaranteed. The effect of this requirement is that superannuation funds cannot prescribe a rate of return in the fund for a member if that rate would mean that the amount of the assets of the fund were reduced so that the assets in the fund would be insufficient to pay the minimum requisite benefits of all members if the fund was terminated at that time.

Clause 7

Clause 7.1 amends regulation 18B of the principal regulations relating to contributions. There are certain restrictions on the age limit of persons when making contributions to a superannuation fund. This amendment allows a superannuation fund to accept contributions in respect of a Superannuation Guarantee arrangement, prescribed agreement or award, notwithstanding that those contributions would not meet those normal restrictions.

Clause 8

Clause 8.1 inserts a new subdivision of Division 2 of Part II of the principal regulations. This new subdivision relates to the information to be disclosed to both employer-contributors of superannuation funds and to the Insurance and Superannuation Commissioner (the Commissioner).

Regulation 18Q

Regulation 18Q requires that trustees of a superannuation fund must provide certain documents to an employer who contributes to the fund for his/her employees where the employer requests such information. The documents required to be provided include the governing rules of the fund in force at the time of making the first contribution in accordance with the Superannuation Guarantee arrangements and any relevant amendments that may be made to those rules after that first contribution is made.

The trustee of the superannuation fund must (not merely at the request of the employer) also provide a signed statement, at the time the first contribution is made, that the fund satisfies the superannuation fund conditions. The trustee must then notify all employers contributing to the fund and the Commissioner as soon as practicable, if, at any time, the fund is in breach of those conditions.

Regulation 18R

Regulation 18R sets the prescribed information and the prescribed period that is required under subsection 10(1) of the Occupational Superannuation Standards Act 1987 (the Act). The prescribed information is identified in Schedule 9 of these amendments (both Forms 1 and 2 must be completed by the trustee of the fund). This information is only required from superannuation funds established on or after 1 July 1992. When this information is received it will be incorporated into an electronic register of superannuation funds which, when developed, will be able to be accessed by the general public.

Regulation 18S

Regulation 18S provides that trustees must give certain information at the request of the employer-contributors of defined benefit superannuation funds. This information must be in the form of a notice and the information should only be provided in respect of employees of employers that are receiving superannuation guarantee support in that particular fund. This section assists the employer to gain information necessary to obtain the Benefit Certificate, which is necessary to be ascertained by employers in line with the Superannuation Guarantee (Administration) Act 1992 (the Guarantee Act). The notice must state:

•       the names and categories of employees of the fund within the meaning of section 10 of the Guarantee Act;

•       the period, or periods, in that year in which the employer's employees were members of the fund;

•       the salary, if any, of the member;

•       the notional employer contribution rate for employees; and

•       whether there has been any alteration to the governing rules which would cause a benefit certificate as required under section 16 of the Guarantee Act to lapse.

Regulation 18T

Regulation 18T provides that standards set out under Division 3 relate only to defined benefit superannuation funds.

Regulation 18U

Regulation 18U provides that a Contribution and Solvency Certificate of an actuary must be obtained for a period of five years and each five years after that period (unless a twelve month certificate under subregulation 18V(1) applies). The certificate must state that the assets of the fund are reasonably regarded as sufficient to meet the accrued benefits of members, to meet any liability of the fund with a priority higher than the accrued benefits of members and also be sufficient to meet the administrative and other costs of operating the fund if the fund were to be terminated in that five year period.

Where the fund was established before 1 July 1992, the certificate should take effect from 1 July 1993. Where the fund was established on, or after, 1 July 1992 such a certificate should take effect from the day of establishment of the fund. After obtaining the first certificate, a new certificate could be obtained at any time, and such a certificate could have effect from any day on which the previous certificate was in force.

For any subsequent period of five years the certificate should take effect from a day on which another certificate is in force - or at the beginning of that period.

A certificate ceases to have effect if another certificate is obtained or, alternatively, at the end of the period of five years for which the certificate was issued.

The five year certificate must be obtained at least twelve months before the expiration of any current five year certificate.

A copy of any certificate obtained must be provided by the trustee to the employer of a member of the fund on whose behalf contributions are being made to the fund.

Regulation 18V

Regulation 18V provides that a twelve month certificate may be issued only if circumstances exist where a five year certificate cannot be obtained. Where a twelve month certificate is issued, the requirements of regulation 18U in relation to five year certificates also apply but relate only to a twelve month period. A twelve month certificate must be replaced at least three months before the end of the period of the certificate.

on providing a copy of this certificate to an employer, a statement signed by the actuary should also be provided setting out the reasons why a twelve month certificate had to be issued rather than a five year certificate. This statement should also specify any action to be taken by the trustee, the employer or another specified person that would enable the actuary to issue a five year certificate.

The trustees of the fund must have the approval of the Commissioner to obtain a third or subsequent consecutive twelve month certificate.

Regulation 18W

Regulation 18W provides that if the governing rules of a fund are amended to provide additional or improved benefits to a member or there is any payment to the employer from the fund (for example any return of a surplus) the trustees must obtain a new certificate.

If a further certificate is necessary because of a change in the rules of the fund or payment to the employer, the variation certificate can only cover the remaining period set down in the original certificate. This provision applies to both five year and twelve month certificates.

Regulation 18X

This provision does not apply to superannuation funds which are Government guaranteed. Regulation 18X provides that where funds are not receiving contributions in line with the Contribution and Solvency Certificate for either five year or twelve month periods certain action must be taken by the trustee.

The trustees of a fund must not vest any further benefits in an employee of an employer until the employer either:

•       contributes the total contributable amount stated in the relevant certificate within twelve months of the end of the year of income; or

•       contributes the total contributable amount under another certificate within twelve months of the end of the year of income.

Regulation 18Y

Regulation 18Y provides special provisions for the 1992-93 year of income. For a fund in operation on 30 June 1992, the rate at which contributions are made by an employer to a fund in respect of a member of the fund must not be less than the rate that is recommended in the last actuarial investigation under existing paragraph 17(1)(a) or a subsequent actuarial investigation under paragraph 17(1)(a) for that period.

Clause 9

Clause 9 inserts a new Schedule 9 to the principal regulations. Schedule 9 relates to the provision of information relating to superannuation funds established on or after 1 July 1992.

Form 1 requests certain information about a new superannuation fund. This information will enable the Commissioner to develop an electronic list of all superannuation funds to provide information to the general public. Information is also requested as to whether the fund has received, or expects to receive, contributions in respect of the Superannuation Guarantee arrangements.

Form 2 seeks certification from the trustee that the superannuation fund's governing rules reflect the superannuation fund conditions of the Act and the fund is operating in accordance with those conditions. It also seeks certification that where there is any breach of those conditions, the trustees will notify the Commissioner immediately in writing.


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