Members of defined contribution (DC) plans in Australia who join under age 25 or have low-balance accounts of less than AUD $6,000 would have to opt in for insurance protection under the Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019. As resubmitted by the Australian government, the proposals — which aim to avoid the erosion of retirement savings through inappropriate insurance — replace an earlier bill that lapsed due to the dissolution of parliament in April.
Highlights of the Bill
Opt-in requirements. Trustees could no longer require certain members who fulfil the eligibility criteria to opt out if they don’t want insurance coverage for a MySuper product or a Choice product. Under the bill:
- New members joining on or after 1 Oct 2019 would have to opt in for insurance coverage until the later of (i) they reach age 25, or (ii) their balance first reaches $6,000 or more.
- Members joining before 1 Oct 2019 would have to opt in to maintain their insurance coverage if their balance has stayed below $6,000 since 1 Jul 2019.
- Funds would have to notify their members with default coverage that their insurance will be cancelled if their balance is less than AUD $6,000 from 1 Jul 2019 to 30 Sep 2019. Members then would have to opt in to maintain their coverage.
- Insurance coverage for accounts with a minimum AUD $6,000 balance on or after 1 Jul 2019 wouldn’t be cancelled if the balance later falls below the threshold.
Default insurance. Default insurance coverage would be required for a MySuper product or permitted for a Choice product for members who meet either of these conditions:
- Members of any age who join a plan before 1 Oct 2019, and whose account has had a minimum balance of AUD $6,000 at any time after 1 July 2019 and has been active within the previous 16 months
- Members aged 25 or older who join a plan on or after 1 Oct 2019, and whose account has had a minimum balance of AUD $6,000 at any time and has been active within the previous 16 months
Other provisions. The bill doesn’t clarify how frequently a trustee must check members’ balances to determine when they trigger the AUD $6,000 threshold. A conditional exclusion applies for insurance fully purchased by the member’s employer on top of Superannuation Guarantee contributions.
Proposed effective date. The proposed effective date is 1 Oct 2019, but the uncertain timing of the bill’s passage and the preparatory work required to implement some provisions (for example, notifying relevant members by 1 Aug 2019) could postpone this deadline.
- Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 (Parliament of Australia)