Members of defined contribution (DC) plans in Australia who are younger than age 25 or have low-balance accounts of less than A$6,000 will have to opt in for insurance protection under the Treasury Laws Amendment (Putting Members' Interests First) Bill 2019, which received Royal Assent on 2 October.
Opt-in requirements. Trustees can no longer require certain eligible members to opt out if they don’t want insurance coverage for a MySuper product or a Choice product. Under the law:
- New members joining on or after 1 Apr 2020 will have to opt in for insurance coverage until they are at least age 25 and their balance reaches A$6,000 or more.
- Members joining before 1 Apr 2020 will have to opt in to maintain their default insurance coverage after 31 Mar 2020 if their balance has stayed below A$6,000 since 1 Nov 2019.
- Fund administrators will have to notify low-balance members who have default coverage that their insurance will be cancelled on 1 Apr 2020 if their balance has not reached A$6,000 before that date and they have not opted in. Affected members as of 1 Nov 2019 must receive notice by 1 Dec 2019.
- Insurance coverage for accounts with a minimum A$6,000 balance on or after 1 Nov 2019 will not be cancelled if the balance later falls below the threshold.
Default insurance. Default insurance coverage will generally 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 Apr 2020, and whose account has a minimum balance of A$6,000 at any time on or after 1 Nov 2019 and has been active within the prior 16 months
- Members aged 25 or older who join a plan on or after 1 Apr 2020, and whose account has had a minimum balance of A$6,000 at any time and has been active within the prior 16 months
Dangerous occupation exception. Recent changes to the legislation added a dangerous occupation exception that allows trustees to provide insurance on an opt-out basis. The exception applies only to members employed as emergency services workers or in an occupation listed in the election form and certified by an actuary to be in the riskiest 20% of occupations. The fund trustee must make a written election to the Australian Prudential Regulation Authority, and a number of other conditions apply.
Other provisions. The law doesn’t clarify how frequently a trustee must check members’ balances to determine when they trigger the A$6,000 threshold. A conditional exclusion applies for insurance fully purchased by the member’s employer on top of Superannuation Guarantee contributions.
- Treasury Laws Amendment (Putting Members’ Interest First) Bill 2019 (Parliament, 2 Oct 2019)
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