Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION (FORMER ELIGIBLE EMPLOYEES) REGULATIONS (AMENDMENT) 1992 NO.170

EXPLANATORY STATEMENT

STATUTORY RULES 1992 No. 170

ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE

SUPERANNUATION ACT 1976

SUPERANNUATION (FORMER ELIGIBLE EMPLOYEES) REGULATIONS (AMENDMENT)

The Superannuation Act 1976 (the Act) makes provision for and in relation to an occupational superannuation scheme for Commonwealth employees and for certain other persons. Members of the scheme are referred to in the Act as eligible employees.

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

Section 126A of the Act provides that the regulations may modify the Act in its application to or in respect of a person who ceases to be an eligible employee and who becomes, immediately after ceasing to be an eligible employee, a member of another superannuation scheme.

Regulations for the purposes of section 126A of the Act are contained in the Superannuation (Former Eligible Employees) Regulations (the Principal Regulations).

The Northern Territory of Australia (NT) is an approved authority for the purposes of the Act and many of its employees are eligible employees for the purposes of the Act. Certain NT authorities are also approved authorities with employees who are eligible employees.

The NT Government has introduced contract employment for certain of its Executive employees. Persons employed under those contracts have a flexible remuneration package which enables them to make choices about the form in which part of their remuneration is received.

As part of the package, a NT Executive who is an eligible employee will be able to choose:

(a)       to continue to be an eligible employee; or

(b)       to cease to be an eligible employee and become a member of a private superannuation scheme.

On becoming a member of a private superannuation scheme, he or she will, by virtue of paragraph 4(a), 4(aa) or 4(o) of the Superannuation (Eligible Employees) Regulations, as appropriate, become a person included in a class of persons for the purposes of paragraph (j) of the definition of "eligible employee" in subsection 3(1) of the Act and will cease therefore to be an eligible employee.

The Regulations amend the Principal Regulations to modify the Act in respect of those NT employees and office holders to whom Executive employment packages apply who cease to be eligible employees on becoming members of a private superannuation scheme.

The amendments are necessary in order to comply with the Occupational Superannuation Standards provided for in the Occupational Superannuation Standards Act 1987 and regulations under that Act. These arrangements will ensure that benefits are not paid to a person who is ceasing membership of a superannuation scheme without changing or ceasing employment.

NT Executives who, as part of their employment package, join a private superannuation scheme and cease to be eligible employees are not to have immediate access to their benefits under the Act. The Principal Regulations modify the Act to provide for the benefits available to these persons under the Act to be preserved or postponed until they cease NT or other employment on or after age 55.

Ordinarily, a person ceasing to be an eligible employee in these circumstances would be entitled to:

(a)       if age 60 or more - age retirement benefits in accordance with section 55 of the Act; or

(b)       in any other case - a lump sum benefit of the person's accumulated contributions under section 80 of the Act.

In both cases, a productivity benefit would be available in accordance with Part VIA of the Act. This benefit would be preserved, in accordance with the requirements of the occupational Superannuation Standards, until retirement from the workforce.

A person referred to in paragraph (b) above would be entitled to elect, under section 137 of the Act, to preserve his or her superannuation rights instead of receiving the benefit referred to in that paragraph and the productivity benefit in accordance with Part VIA of the Act.

Instead, it is intended that NT Executives who ordinarily would have been entitled to an age or early retirement benefit under the Act had they retired or resigned are to be entitled to a postponed age or early retirement benefit payable when they cease employment. Those who would not have been entitled to an age or early retirement benefit are to be entitled to deferred benefits payable on ceasing NT employment after age 55 or on invalidity or death.

ATTACHMENT

SUPERANNUATION (FORMER ELIGIBLE EMPLOYEES) REGULATIONS (AMENDMENT)

The details of the amending regulations are as follows -

Regulation 1

This provides that the Superannuation (Former Eligible Employees) Regulations are amended as set out in the amending Regulations.

Regulation 2

This inserts regulation 14 which provides that the modifications outlined in Schedule 10 are to apply to those NT employees and office holders employed under an Executive Contract of Employment who, in accordance with that contract, become members of a private superannuation scheme and cease to be eligible employees.

Regulation 3

This inserts Schedule 10 which includes the following modifications to the Superannuation Act 1976 in relation to persons described in regulation 14 -

item 1

This item modifies section 58 of the Act to provide that a person to whom the regulations apply will be taken to have retired voluntarily if, on ceasing to be an eligible employee, he or she has reached age 55 but not age 60.

This will ensure that the person is entitled to early retirement benefits in accordance with section 59 of the Act. Those benefits would otherwise be available only if the person resigned or retired. (Modifications are not necessary in respect of persons who are aged 60 or over on ceasing to be eligible employees as the provisions of section 55 of the Act automatically provide for their entitlement to age retirement benefits.)

item 2

This item omits section 110T of the Act and replaces it with a new section 110T which provides that a person who is entitled to an age retirement pension or an early retirement pension is taken to have elected to postpone payment of that pension.

item 3 and 4

These items modify section 110TA of the Act to ensure that the whole of the benefit is postponed.

item 5

This item modifies section 110TB of the Act to ensure that the postponed benefit does not become payable before the person ceases NT employment.

item 6

This item modifies section 137 of the Act to provide that a person who is not entitled to an age retirement pension or an early retirement pension is taken to have elected to preserve his or her superannuation rights.

item 7

This item modifies section 139 of the Act to provide that deferred benefits are applicable to a person who is taken to have elected to preserve his or her superannuation rights in accordance with section 137 as modified by item 6.

item 8

This item modifies subsection 139(2) of the Act to clarify that deferred benefits are payable automatically on death.

item 9

This item modifies section 139 of the Act by the removal of subsection 139(3) which provides that deferred invalidity benefits are payable subject to the satisfaction of certain requirements.

The item inserts a new subsection 139(3) which provides that deferred benefits are not payable to a person who has reached age 55 until the person has ceased NT employment.

The item also omits subsection 139(4) of the Act which provides that certain employment after a person ceases to be an eligible employee can be counted towards the qualifying' period for deferred benefits. Further employment is not necessary for deferred benefits to be available to these persons.

item 10

This item modifies section 139 of the Act by the removal of subsections 139(6) and (7) which would otherwise impose qualifications on the availability of deferred benefits.

item 11

This item modifies the Act by the removal of section 141 which would otherwise impose qualifications on the availability of deferred benefits.

These arrangements satisfy the Occupational Superannuation Standards but ensure that the benefits that would have been available to the person had he or she retired or resigned are available on subsequent cessation of employment. They are provided for in the Regulations.

The provisions of the Regulations are explained in the Attachment.

The Regulations operate from the date of gazettal.


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