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Superannuation Circular 2006/7
Department of Finance and Administration
Superannuation Circular
No. 2006/7
Choice of superannuation fund for returning employees and office holders with an accrued entitlement in the PSS from 1July 2006
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Purpose
This circular provides information about Australian Government (AG) employees or statutory office holders (office holders) who have an accrued Public Sector Superannuation Scheme (PSS) entitlement and return to AG employment or commence an AG appointment on or after 1July2006.
For the purposes of this circular an accrued PSS entitlement is a preserved benefit that has not been paid or a PSS invalidity pension.
An accrued PSS entitlement does not include a pension that is not an invalidity pension.
Information about AG employees or office holders who have accrued entitlements in the Commonwealth Superannuation Scheme (CSS) and return to AG employment or commence an AG appointment on or after 1July2006 will be provided shortly. In the interim if employers have such employees or office holders they should contact the Employer Help Desk on 62729993 if they need assistance to determine eligibility for CSS membership.
This circular assumes employers are offering standard choice of superannuation fund (choice) to employees and office holders in accordance with the Superannuation Guarantee (Administration) Act 1992 (SG Act) and are not complying with choice through employer superannuation contributions made under, or in accordance with, a workplace agreement or State industrial award.
Target Audience
This circular is relevant to Corporate, Human Resource and Finance areas of agencies in respect of AG employees and office holders with an accrued entitlement in the PSS.
Key Points
1. A new on-going[1] AG employee with an accrued PSS entitlement must resume membership of the PSS. These employees have no choice of fund.
2. A new non-ongoing1 AG employee or office holder with an accrued PSS entitlement will usually have a choice of fund. In most cases this choice will include a choice to return to the PSS. Employees and office holders who rejoin the PSS will have no further choice offund.
3. The employer may need to select an employer (default) fund for those employees or office holders who have choice – see section on Employer (Default) Fundbelow.
4. Where there is a change in the employment status of an employee or office holder with an accrued PSS entitlement, that employee or office holder may be required to return to the PSS. For example, if an employee (with an accrued PSS entitlement who has not elected to return to the PSS) changes from non-ongoing employment where they had choice of fund to ongoing employment, that employee will be required to resume membership of the PSS.
5. The diagram in Attachment A illustrates the superannuation arrangements that may apply to a new employee or office holder from 1July2006 who has an accrued PSS entitlement.
It would be prudent for an employer to inform employees or office holders who can join the PSS or who will default to the PSS if they do not choose a fund, that PSS members do not have choice of fund.
An employee or office holder with an accrued PSS entitlement will become a PSS member where they:
(a) are required to return (including where their employment changes from non-ongoing to ongoing);
(b) elect to return and meet the necessary scheme requirements; or
(c) are offered choice and have not selected a complying superannuation fund (CSF) or retirement savings account (RSA)[2] and the employer fund is the PSS. (See paragraph 15 on when the PSS is the default fund).
Such information should be framed so that it does not constitute financial product advice (see Superannuation Circular 2006/6 available at www.finance.gov.au/super.
Choice of fund for non-ongoing employees and office holders with accrued PSS entitlements
6. Non-ongoing employees and office holders with accrued PSS entitlements who are employed or appointed before 1 July 2006 and have not elected to join the PSS would have superannuation provided by the Superannuation (Productivity Benefit) Act1988 (PB Act). That Act provides for a limited choice of fund for which AGEST is the default fund. More information about the PB Act can be obtained from Superannuation Circulars 2005/6 available at www.finance.gov.au/super and 2006/8 (which will be available at the same websiteshortly).
7. Persons covered by the PB Act at 30June2006 will continue to be covered by that Act until they no longer meet the qualifications for PB Act coverage (i.e. because they cease relevant employment or, if eligible, become members of an Australian Government superannuationscheme).
8. The PB Act will not apply to new employees and office holders from 1 July 2006. This will mean that employers will need to provide superannuation that complies with the SGAct, including the choice requirements, for new non-ongoing employees or office holders with a PSS accrued entitlement who do not elect to return to the PSS.
9. Information about choice can be obtained on the Australian Taxation Office’s website at www.ato.gov.au/super.
10. Employers can comply with choice through a workplace agreement. However, a workplace agreement cannot remove an employee’s right to return to the PSS if they are eligible.
11. In other circumstances employees and office holders should be offered a choice of any CSF or RSA that they are eligible tojoin.
12. In choosing a superannuation fund non-ongoing employees and office holders with an accrued PSS entitlement may choose the PSS provided they meet the relevant qualifications for membership[3].
Employer (Default) Fund
13. Where an employee or office holder is offered choice and does not validly choose a CSF or RSA, the employer will be required to pay superannuation contributions, at the superannuation guarantee rate or above, on behalf of the employee or office holder into the employer fund. More information about the superannuation guarantee can be obtained from the Australian Taxation Office’s (ATO) website at www.ato.gov.au/super or by phoning 1310 20.
14. The employer fund must be a CSF that meets the prescribed minimum level of life insurance requirements[4] or an RSA. More information about a CSF or RSA can be obtained from the Australian Prudential Regulation Authority’s website at www.apra.gov.au or by contacting 1300 13 1060.
15. For persons employed under the Public Service Act 1999 (PS Act) who have an accrued PSS entitlement the prescribed employer fund is the PSS.
16. Employers of non-PS Act employees must select their own employer fund, which must be a fund that is open to membership by the relevant employees. The Public Sector Superannuation Accumulation Plan (PSSAP) cannot be the default fund for employees who have an accrued PSS entitlement.
For PS Act employees with accrued PSS entitlements (where the employer fund is the PSS), it would be prudent for employers to offer choice immediately upon commencement of their employment or appointment so that they are aware that if they have not selected an alternative scheme by their first payday they will become members of the PSS and that as members of the PSS they will not have choice.
When is an Employer Fund not required?
17. Section 32NA(6) of the SG Act provides that where there is no employer fund for an employee, an employer does not need to select an employer fund for that employee if it is a condition of the employment that the employee validly chose a fund or RSA that the employer could contribute to at the time the choice is made. The employer will still need to keep appropriate records indicating that the employee has selected an eligible choicefund. This section would only apply to non PS Act employees.
Further Information
18. For further assistance regarding matters in this circular, or suggestions to improve the information provided, agencies may wish to contact the Superannuation Policy Branch of this Department at or contact the Department’s choice inquiry hotline number on (02)62151666.
Sandra Wilson
Branch Manager
Superannuation Policy Branch
Financial Management Group
6 July 2006
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Superannuation Circular 2006/7
Department of Finance and Administration
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Superannuation Circular 2006/4
Department of Finance and Administration
[1] Legislation governing superannuation arrangements for AG employees generally refers to the concept of permanent or temporary employment to determine the superannuation arrangement that applies to an employee. However, for the purposes of this circular (and consistent with more commonly used terms of employment), permanent and temporary employees are referred to as ongoing and non-ongoing employees respectively. Employers should note that in certain circumstances a non-ongoing employee may be considered to be a permanent employee and this circular should be read accordingly.
[2] A CSF is a fund that is regulated under the Superannuation Industry (Supervision) Act 1993. A RSA is an account offered by banks, building societies, credit unions, life insurance companies and prescribed financial institutions.
[3] A non-ongoing AG employee or office holder must meet one of the necessary requirements to be eligible to elect to join the PSS. These requirements are: employment under a contract of three months or more; or completion of three months eligible employment within the last two years; or an intention to pay a superannuation amount into the PSS.
[4] Further information on the required insurance arrangements for employer funds is available at www.ato.gov.au/super or by contacting 131020.