Australia's new “Protecting Your Superannuation” law, effective 1 Jul 2019, will present implementation challenges for pension funds, which must send notices to members in April and/or May 2019.
Highlights of the changes include the following:
- Insurance restrictions on inactive accounts. Superannuation funds will be restricted to providing insurance on an opt-in basis for accounts that haven’t received a contribution for at least 16 months, up from 13 months. Technically, this also applies separately to MySuper and Choice components, presumably requiring a decision on which component the insurance is attached.
- A new Australian Tax Office (ATO)-based consolidation process. All inactive low-balance accounts must be transferred to the ATO. These are accounts that:
─ Have a balance of less than AUD $6,000
─ Aren’t related to a defined benefit interest
─ Don’t have insurance
─ Haven’t received a contribution in the previous 16 months
─ Don’t meet a condition of release specified in regulations that are yet to be published
─ Haven’t experienced (after the amendments) any of the following extra activity tests in the previous 16 months:
− A change in the member’s choice of fund investment options
− Changes to the member’s choice of insurance coverage under the fund
− Nomination or amendment of a binding beneficiary
− Written member notification to the ATO that the member wasn’t a member of an inactive low balance account
− An amount due to the fund for a member, for example, superannuation guarantee contributions
The ATO will be given powers to reunite ATO-held accounts with an active account in the member’s name if the consolidated balance would amount to AUD $6,000 or more. Also, the amendment requires the ATO to transfer any balance to an eligible active account within 28 days of identifying the account.
- Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 (Parliament of Australia, 3 Mar 2019)