The Government is announcing enhancements to the Budget proposal to give Australian employees greater choice of the superannuation fund or Retirement Savings Account (RSA) into which compulsory superannuation contributions are made. The decision to enhance the Budget proposal follows extensive consultations with superannuation funds, industry associations, employer associations, small business and those representing employee interests.
The enhancements announced today will improve the choice arrangements by significantly reducing the administrative burden on employers while ensuring the key objective of providing choice of fund to employees is achieved. The most important modifications include:
- addressing concerns about employer legal liability by ensuring that where an employer acts in accordance with the legislation, no legal liability will arise;
- reducing the minimum number of funds/RSAs that an employer must offer from 5 to 4, by not requiring employers to offer an RSA of the institution receiving the employee's pay;
- allowing employers the option of providing 'unlimited employee choice', as an alternative to offering choice of fund via a workplace agreement, or through the choice of four superannuation funds/RSAs option - employers will be able to pick the method of providing choice which best suits their particular circumstances;
- defining 'workplace agreements' broadly to cover formal agreements (Australian Workplace Agreements and Certified Agreements) plus specified types of informal agreements; and
- allowing the selection of 4 funds/RSAs to be facilitated through one institution or service provider.
Legislation to implement these arrangements will be introduced into Parliament before the recess.
A more detailed outline of the changes is attached.
CANBERRA,
25 November 1997
Contact: Richard King - (02) 6277 7360 or 0419 683 586
Attachment
EMPLOYER LIABILITY
The legislation will ensure that employers cannot be held legally liable for actions they take to satisfy choice of fund obligations.
EMPLOYER FLEXIBILITY IN PROVIDING CHOICE
Employers will also be given greater flexibility in providing choice of fund through a number of enhancements to the Budget announcement. Under the enhancements employers will be able to meet their choice obligations in any of the following three ways:
- offering the choice of 4 funds/RSAs; or
- negotiating a workplace agreement which includes superannuation arrangements; or
- providing unlimited employee choice.
Choice of 4 funds/RSAs: Employers who decide to offer choice under the previously announced regime will now only need to offer a minimum of four funds. They will not be required to offer the RSA of the institution receiving the employee's pay.
Workplace agreements: Employers will be able to meet their choice obligations through the use of both formal and informal workplace agreements. Formal agreements are Australian Workplace Agreements and Certified Agreements. Informal agreements would be accepted where an employee nominates in writing the fund/RSA of the employee's choice and the employer agrees to that nomination (the employer would not be obliged to accept the nomination).
Unlimited employee choice: Employers will be able to satisfy their choice obligations by offering 'unlimited employee choice'. Under unlimited choice arrangements, the employer would not have to provide the choice of 4 funds option, and the employee would be responsible for the collection of information, eg the Key Features Statement and the application form for their chosen fund or RSA.
TECHNICAL ISSUES
The legislation will provide for the choice of four funds/RSAs to be facilitated through one institution or service provider. This would enable one financial institution or service provider to offer employers two or more of the four choices. However, a single fund/RSA can only count as a public offer fund, or an industry fund or an RSA for the one employer, ie. one fund/RSA can only count as one of the four choices. Employers can continue to use the existing earnings base to calculate Superannuation Guarantee obligations, even where employees choose to change funds.
Limited access in-house superannuation funds (ie, funds offered to a certain class of employees, such as executive only funds) will not be required to be offered to all employees as part of the choice regime. RSA 'look-a-likes' will be treated as RSAs for the purposes of the choice of fund legislation.
In circumstances where superannuation contributions are paid, but not to the correct fund, the Superannuation Guarantee Charge penalty for failing to comply with the choice of fund requirements will be reduced to 25 per cent of the shortfall and interest component (plus all of the administration component) that would apply if the contributions had not been paid.