SUPERANNUATION (FORMER CONTRIBUTORS FOR UNITS OF PENSION) REGULATIONS(AMENDMENT) 1996 NO. 102

Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION (FORMER CONTRIBUTORS FOR UNITS OF PENSION) REGULATIONS(AMENDMENT) 1996 NO. 102

EXPLANATORY STATEMENT

STATUTORY RULES 1996 No. 102

Issued by the Authority of the Minister for Finance

Superannuation Act 1976

Superannuation (Former Contributors for Units of Pension) Regulations (Amendment)

The Superannuation Act 1976 (the 1976 Act) makes provision for and in relation to an occupational superannuation scheme for Commonwealth employees and for certain other persons. That scheme is known as the Commonwealth Superannuation Scheme (CSS).

Section 168 of the 1976 Act provides that the Governor-General may make regulations for the purposes of that Act.

Persons who were members of the superannuation scheme established by the Superannuation Act 1922 (the 1922 Act) on 30 June 1976 to the CSS on its commencement on 1 July 1976. Special arrangements apply under the CSS to those members of the 1922 Act scheme who were transferred to the CS S.

Section 183 of the 1976 Act enables the Act to be modified by regulations made in relation to the transferred contributors. Special arrangements applicable to the transferred contributors made in regulations under that section include arrangements for former contributors for units of pension contained in the Superannuation (Former Contributors for Units of Pension) Regulations (the Principal Regulations).

The Schedule to the Principal Regulations modifies section 62, which provides for the payment of a lump sum on involuntary retirement, to include in the calculation of the lump sum any contributions that would have been payable under the 1922 Act. The Schedule also modifies section 111 of the 1976 Act, which provides for the minimum benefit payable, by omitting subsection 111(2) and inserting a different subsection (to include certain amounts that would have been payable under the 1922 Act) and amending subsection 111(8).

The Superannuation Legislation Amendment Act (No. 1) 1995 (the amending Act) amended the 1976 Act in certain ways that necessitated amendments to the regulations that modify that Act. Subsection 168(12A) was inserted to provide that regulations arising from the amendments to the Act may be made with retrospective effect within one year after the amending Act received Royal Assent. The Regulations amend the Principal Regulations as a consequence of the amendments to the 1976 Act contained in the amending Act.

Item 4 of Schedule 2 to the amending Act amended the definition of "period of contributory service" included in subsection 3(1) of the 1976 Act as a consequence of the amendments included in items 9 and 72. These two items create additional periods that should be excluded from contributory service, ie, periods between employments that arise from subsection 3(3) and periods during which section 55A would not allow the accrual of benefits because of the Superannuation Industry (Supervision) Act 1993 and regulations under that Act (SIS).

Item 80 of Schedule 2 to the amending Act amended section 62 of the 1976 Act, which provides for the payment of a lump sum benefit in the case of involuntary retirement, to introduce the concept of "notional contributions" where a person has been in receipt of partial invalidity pension under section 77 or 78 of that Act prior to becoming entitled to the benefit. The amendment is intended to ensure that the person is not disadvantaged when the employer component of their benefit is a lump sum calculated from their accumulated basic contributions rather than a pension expressed as a percentage of their final annual rate of salary. The item omitted subsections 62(2) and (2A) and inserted subsections 62(2), (2A), (2B), (2C) and (2D).

Item 82 of Schedule 2 to the amending Act inserted a new subsection 76(3) in the 1976 Act to correct an anomaly that could occur when a person who has been in receipt of invalidity pension under the Act attempts to return to work and does not complete the probationary period because of a physical or mental condition. In those circumstances payment of the invalidity pension would have ceased when the person returned to employment. Because of the changed invalidity procedures the person may not be able to be retired on invalidity grounds despite being considered sufficiently incapacitated to have a probationary appointment not confirmed. The amending Act provided for the restoration of the invalidity pension in these circumstances.

Items 102 and 103 of Schedule 2 to the amending Act amended section 111 of the 1976 Act to ensure that the minimum benefit payable under the Act included an amount equivalent to the Superannuation Guarantee minimum amount that would have been payable on resignation. An amendment was made to subsection 111(2) and subsection 111(8) was repealed as the amended subsection (2) included the provision previously contained in that subsection.

THE AMENDMENTS

Regulation 1

This regulation provides that subregulations 4.1, 4.3, 4.4, and 4.5 commence on 23 June 1995 and subregulation 4.2 commences on 1 July 1995.

Regulation 2

This regulation provides that the Principal Regulations are amended by the amending Regulations.

Regulation 3

This regulation changes the name of the Principal Regulations from Superannuation (Former Contributors for Units of Pension) Regulations to Superannuation (CSS) Former Contributors for Units of Pension Regulations.

Regulation 4

This regulation modifies the Schedule to the Principal Regulations which applies in relation to former contributors for units of pension.

Subregulation 4.1

This subregulation amends the existing modifications of section 62 of the 1976 Act as a consequence of the amendments made by item 80 of Schedule 2 to the amending Act. That section provides for two methods of calculating benefits on involuntary retirement, one to apply before 1 July 2000 and the other to apply after that date. The existing modifications of section 62 of the 1976 Act in Schedule 1 of the Principal Regulations provide for an increase in the lump sum benefit payable to a former contributor for units of pension who had superannuation rights from previous employment where the pensioner elected to pay a transfer value to the superannuation scheme established by the 1922 Act.

Subregulation 4.1 omits the modifications to section 62 and inserts new modifications to that section to provide for benefits on retrenchment for a former contributor for units of pension including the calculation of notional contributions where relevant as a consequence of item 80 of Schedule 2 to the amending Act.

The first modification inserted by this regulation maintains the existing provisions in relation to former contributors for units of pension who are retrenched prior to 1 July 2000 by means of subregulations 62(2AA)(a) and (b), except where such persons have at any time been in receipt of partial invalidity pension. In these cases the subregulation 62(2AA)(b) (ii) provides for lump sum benefits to be calculated on the basis of the contributions that would have been payable had salary not been reduced because of the payment of partial invalidity pension.

The second and third modifications insert a reference to the new subsection 62(2BA) in subsections 62(2A) and (2B).

The fourth modification inserts a new subsection 62(2BA) which maintains the existing provisions in relation to former contributor for units of pension who are retrenched on and after 1 July 2000 except where such persons have at any time been in receipt of partial invalidity pension. In these cases the subregulation 62(2BA)(b)(ii) provides for lump sum benefits to be calculated on the basis of the contributions that would have been payable had salary not been reduced because of the payment of partial invalidity pension.

The fifth and sixth modifications insert a reference to subsection 62(2BA) in paragraphs 62(2C)(a) and (b).

The seventh modification inserts a new subsection 62(2CA) in place of the omitted 62(2AA) which provides that former contributors for units of pension in respect of whom non-contributory units of pension were applicable under the superseded Act receive an additional benefit under the 1976 Act. Subsection 62(2CA) provides that payments made under subsections (2), (2A), (2B), (2BA), and (2C) be added to any additional benefit payable due to any non-contributory units of pension that were applicable.

Subregulation 4.2

This subregulation omits and replaces the existing modifications of section 111 as a consequence of the amendments made to section 111 of the 1976 Act by items 102 and 103 of the amending Act.

The existing modifications to section 111 apply in the case of a former contributor for units of pension who had been in receipt of invalidity benefits for a period under the previous legislation. The modifications allow for the inclusion of any amount contributed to the Fund under the superseded Act prior to that period in the minimum amount that may become payable under the section.

Subregulation 4.3

This subregulation modifies Schedule 2 to the Principal Regulations by substituting a reference to subsection 62(2CA) for a reference to subsection 62(2AA) so that modified Schedule 2A applies in relation to the newly inserted subsection.

Subregulation 4.4

This subregulation modifies Schedule 2 to the Principal Regulations by substituting a reference to paragraph 62(2CA)(a) in place of a reference to subparagraph 62(2A)(a) in Column 2 of the substituted Schedule 2A.

Subregulation 4.5