In addition to the Stronger Super reforms currently impacting the superannuation industry, changes made in late 2012 to the Fair Work Act 2009 have the capacity to significantly alter the influx of new superannuation contributions to funds where the fund's participating employers are subject to a modern award. This is because, generally speaking, if a fund is named in the modern award, an employer must make contributions to that fund unless an employee chooses an alternative fund.
The Federal Government has responded to recommendations made by the Productivity Commission's Report into Default Superannuation Funds in Modern Awards by implementing significant changes to the way default funds are included in modern awards.
Before the changes, there were no objective criteria for funds to be included in a modern award. Going forward, an expert panel of the Fair Work Commission must make and publish a default superannuation list, having regard to whether it is in the best interests of employees covered by the modern award for a particular fund to be included in the list. The Fair Work Commission will then review each modern award and ensure that it specifies at least two, but generally no more than 10, default funds from the list. This review will occur every four years.
These changes will see important opportunities created for superannuation funds to be listed as a default superannuation fund under modern awards, while those funds that are not listed stand to miss out.
What can be done?
Fund trustees that offer a generic 'MySuper' product may make an application to the Fair Work Commission to be listed as a default superannuation fund under their industry modern award.
With the review process to begin soon after 1 January 2014, fund trustees are strongly encouraged to begin preparing their application.
In making the application, fund trustees are required to show that the product offered is in the best interests of the employees covered by the modern award.
As an alternative, to avoid making an application and participating in the four yearly review process, fund trustees may agree with employers that their superannuation fund is to be named as a default fund under an enterprise agreement. The enterprise agreement will then operate to the exclusion of the requirements in the modern award.
Including a superannuation fund under an enterprise agreement or making a successful application to the Fair Work Commission will ensure the superannuation fund continues to receive employer contributions for employees covered by a modern award or enterprise agreement.
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.
