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.
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:
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:
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.