As with the MySuper product, many of the reforms proposed for SuperStream have already been discussed in detail.
Of all the proposed reforms, SuperStream has been the one most broadly accepted by the industry but there has been some disappointment where the reforms have been perceived as not going far enough.
Back office processing
The implementation timeline for the data and e-commerce standards which form part of SuperStream is as follows:
Early 2012 -Data standards published and available for use by superannuation funds (Funds) (voluntary uptake by Funds can commence from this point).
July 2013 - Data standards and use of e-commerce becomes mandatory for APRA-regulated funds and self managed superannuation funds for processing rollovers and accepting contributions (provided by employers in the new format).
July 2014 - Data standards and use of e-commerce becomes mandatory for large and medium employers making contributions.
July 2015 - Proposed application of data standards and use of e-commerce for small employers (subject to further consultation on impact).
The SuperStream reforms are intended to address existing inefficiencies in back office processing within the superannuation industry. This includes the lack of mandated data or transmission requirements for transactions within the superannuation system. The result is different data requirements and formats for processing data and payments, poor data quality and receipt of insufficient member information preventing correct allocation of contributions.
The widespread use of manual payments, such as cheques, data transfers using paper forms also contribute to poor data quality, processing delays, duplicated and lost accounts are also highlighted, all of which add to the cost of the system.
To address these inefficiencies the Government proposes:
- improving the quality of the data in the system;
- allowing use of tax file numbers (TFNs) as the primary locator of accounts;
- encouraging use of technology to improve processing efficiency; and
- improving the way Fund to Fund rollovers are processed and how contributions are made.
To achieve the above, standardised forms and common data standards will be developed to support electronic transactions. The Standard Business Reporting (SBR) framework will be used as the platform to develop the taxonomy and message structure for superannuation transactions, along with the use of eXtensible Business Reporting Language (XBRL) to exchange information. In addition, the payment standard prescribed by the Australian Payments Clearing Association (APCA) and international financial messaging standards prescribed by the International Organisation for Standardisation (ISO 20022) will be used.
The Government has recognised that to achieve improvements in data quality, it will be necessary to mandate the use of data and payment standards for all superannuation transactions that involve member contributions and rollovers. The Government will therefore legislate mandating use of the new data and payment standards and reporting to Government to maximise efficiencies.
Consultation will continue with employer groups to develop the best and most practical ways to assist small employers with the implementation of the data and e-commerce standards. This will include use of the Medicare Small Business Superannuation Clearing House to streamline processing.
Information provided from Employers
Employers will provide superannuation funds with member information and linked payments in a standard electronic format that will remove substantial manual processing. This will improve the quality of member information received from employers and reduce the costs of reworks caused from incomplete or incorrect information.
Employers will be able to send contributions in a standard electronic format and will not need to submit this information to separate funds in different paper formats.
This will allow allocation of contribution payments to member's accounts quickly, and the improvement in the quality of the data will reduce the instances of lost super caused by incorrect or incomplete data sent to superannuation funds.
How these changes will be communicated to employers remains to be seen. While the Government may take some initiative in this area, it is clear that trustees of superannuation funds will also need to engage employer sponsors at an early stage, in relation to these changes, and other changes proposed under Stronger Super. Failure to do this could result in delays in the implementation. There are clearly advantages for employers through these improvements, although there may be some resistance at the implementation stage, particularly with smaller employers.
CONSOLIDATOIN OF ACCOUNTS
The timeline for account consolidation is as follows:
July 2011 - Superannuation funds can use TFNs as the primary locator to find accounts within a Fund.
January 2012 - Funds can use TFNs to search the ATO's current service to search for lost accounts, but only with member consent.
July 2012 - A member with multiple accounts within a Fund will have their accounts consolidated where possible.
July 2012 - The ATO will provide a new on-line facility for members to view active accounts only, in addition to their lost accounts and other superannuation monies held by the ATO (e.g. unclaimed money). Superannuation fund trustees will also be able to search account information, but only with member consent.
October 2013 - Funds must report all inactive accounts, lost accounts and active accounts to the ATO.
January 2014 - Commencement of automatic consolidation of lost and inactive accounts (i.e. 2 years without contributions or rollovers) with a balance of less than $1,000.00 and accounts in eligible rollover funds.
July – December 2014 - Enrolment process for new employees will be modified so employees can actively consider account consolidation at this time. If no choice is exercised, the default option is to create a new account and transfer any lost or inactive accounts with balances of less than $1,000.00 into the new account using the auto consolidation process.
Problems with multiple superannuation accounts and lost super has been an issue for the superannuation industry for many years, and previous attempts to resolve these issues have not been completely successful. The reforms proposed are as follows:
- A streamlined process to consolidate accounts and avoid members paying unnecessary fees, including insurance premiums.
- Accounts with less than $1,000.00 will be automatically consolidated with the current active account unless a member opts out.
Superannuation funds will be able to search the Australian Taxation Office (ATO) registers for lost or unclaimed superannuation, as well as information on member accounts so that they can prompt members to consolidate superannuation accounts.However to take this action, trustees have to obtain member consent. For new members this can be built into the original application for membership. For existing members it may prove more difficult as invariably, members when requested to take action (i.e. by signing and returning a consent form) invariably do nothing.The automatic consolidation is confined to accounts less than $1,000.00 and therefore its effectiveness is seriously undermined. The industry is already raising this fact with Government.
ATO consolidation process
The process is initiated by the ATO and will occur annually. The ATO will identify the relevant accounts and advise the active Fund. At this point the active Fund becomes responsible for arranging consolidation, unless the member opts out.
A prescribed time will be given for the active Fund to contact the member advising them that if they do not opt out, the active Fund will contact the other Funds concerned, and the automatic consolidation process will be activated.
A warning must be given to the member that insurance cover in other Funds may be lost, and they should consider this and any relevant information before making a decision to opt out. A prescribed time will be set for the member to respond if they do not want accounts automatically consolidated.
Increase in threshold amount for auto consolidation
In the latter half of 2014 the $1,000.00 threshold will be increased to at least $10,000.00. This will be subject to review by Treasury, ATO and APRA. Industry is likely to find even the $10,000.00 threshold inadequate to fully address this problem.
Enhance new employee enrolment process
This process commences during July – December 2014 to ensure new employees consider account consolidation at the time they join a new employer.
The process will allow them to access details of all their superannuation accounts from the ATO on-line, to assist them in exercising a choice. The employee can then use this information to elect to have superannuation contributions made to their existing account, or open a new default account. They can also elect to consolidate their other accounts on-line. The employee's active account will be notified by the ATO when such an election to consolidate occurs. The active Fund will then have a period of time in which to obtain consent and complete the consolidation.
This service will also be made available to existing employees who will also be able to choose to consolidate.
While this works in theory, the challenge will be to encourage new employees and existing employees to actually use this service. There is no detail around how employees, and also their employers, will be educated concerning this new process. Involvement of employers in this process will be critical to its success.
No TFN contributions
Use of TFNs will be expanded so that where a contribution is received and the trustee is unable to obtain a TFN, or other identifying details within a specified timeframe, it will then send the money to the ATO as part of the unclaimed money process. This new arrangement for the treatment of no TFN contributions will commence from 1 July 2013.
INFORMATION TO BE PROVIDED BY EMPLOYERS TO EMPLOYEES
Currently, information on pay slips indicate the amount of superannuation accrued during the pay period, even where an employer has not made the contribution until after the end of the quarter. Employees are not in a position to know whether their employer has in fact made these contributions to the chosen or default fund on their behalf.
Although superannuation funds forward annual benefit statements with details of contributions made, these may not be issued for up to 18 months after the pay period in which superannuation contributions was supposed to be paid.
This lack of information places employees in a situation where they may not become aware of non payment of their contributions in sufficient time to take action and prevent those contributions from being lost.
To overcome this problem the following steps are proposed:
Information on pay slips
From 1 July 2012 employers will be required to report on payslips an "expected payment on or before date" in addition to the current entitlement during the pay period. This may be the due date for payment of the superannuation guarantee contribution, or a due date specified under a Workplace Agreement or Industrial Award. This in intended to place employees in a situation where they are advised of the expected date of payment of contributions to their superannuation fund, which will allow them to follow up with the Fund direct, in order to confirm that payments have been made by the due date.
From 1 July 2013, pay slips will need to report on the actual contributions paid, rather than those accrued, including which Fund they have been paid to. However, the provision of this additional information is conditional upon their being "no significant payroll system costs". This could mean once again this initiative is lost. Protection of member contributions should be the priority.
More frequent notification by Funds
In conjunction with improving the information provided on employees pay slips by employers, superannuation funds will also be required to report more frequently to members. It is proposed that Funds will either issue 6 monthly statements showing contributions made, or must report electronically to members on whether they have received or not received superannuation contributions during the quarter. Compulsory notification will commence on 1 July 2013.
A SuperStream Advisory Council will be established to oversee the SuperStream data and e-commerce standards implementation. Members of the Council will be appointed by Government and will report to Government on agreed measures for success of SuperStream. It is intended the Council be established in early 2012.
While it is clear that this initiative will deliver a number of improvements in efficiency, the initial cost of setting up for these changes will be considerable. While the superannuation industry is engaged and fully aware of these impending changes it is likely that employers and their employees are not as yet aware or engaged.
A number of the initiatives will require the commitment of employers to not only adopt the required procedures, but to encourage employees to take advantage of the services available to them.
It would be appropriate if this education campaign were initiated and funded by the Government, so that the cost burden does not fall on superannuation funds.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.