Accounting services

SIS Act and corporations law compliance

To ensure that the Board complies with the Superannuation Industry (Supervision) Act 1993 (the SIS Act), the Audit and Risk Management Committee has adopted a comprehensive SIS Act/corporations law checklist. The Board’s Compliance Manager is responsible for the SIS Act/corporations checklist as well as ensuring the Board’s compliance with other legislative requirements.

A detailed compliance report was provided to the Audit and Risk Management Committee in September 2008 and, as appropriate, exceptions are reported at each meeting.

As the Board’s Scheme administrator, ComSuper:

• maintains the Fund’s general ledger summarising monthly contributions, benefits and investment transactions as reported by the Fund Custodian
• prepares the annual financial statements of the Scheme in a form approved by the Board and the Minister
• prepares monthly (unaudited) financial statements in a form agreed with the Board
• assists the Board Executive in the preparation of annual APRA returns and the Annual Report to Parliament in accordance with relevant guidelines for reporting by Government agencies and the directions of the Board
• prepares quarterly Business Activity Statement (BAS) and pays tax instalments by the due date
• manages the annual taxation return in collaboration with the Fund’s taxation adviser and Executive
• calculates daily unit prices for five options in accordance with the Board’s Unit Pricing Policy and in concert with the Fund Custodian and Executive
• provides annual letters of comfort to the Board and to the Board’s external auditor regarding information provided for annual financial statements
• liaises with the Board’s specialist advisers on Scheme accounting and taxation issues
• provides the Board with the opportunity to participate in the development of ComSuper’s annual internal audit program to identify areas of mutual interest and to examine reports of specific internal audits where there is a coincidence of interest
• provides reasonable access to internal audit staff to attend the Board’s Audit and Risk Management Committee meetings and to advise on audits completed or in progress
• provides a quality assurance role on accounting information provided by the Custodian or other sources.
  

Audit of financial statements

The Auditor-General has issued an unqualified audit opinion in respect of the financial statements of the Scheme and Board for the 2008–09 financial year.

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Account Maintenance

The maintenance of MilitarySuper Contributing Member, Preserved Benefit Member and Pension Member accounts is a major function provided by the Board’s legislated Scheme Administrator (ComSuper) in conjunction with the Department of Defence. The principal aims of this function are defined by the enabling legislation for the Scheme and are articulated in the Service Level Agreement between the Board, ComSuper and the Defence organisation.

Collection, recording and maintenance of Member information

The Board’s administrator:

• maintains records of Contributing Members, Preserved Benefit Members and Pension Members to facilitate, among other things, the accurate and timely publication of Member statements, accurate and timely communications, the accurate and timely payment of benefits, various reporting requirements and reconciliation against Fund accounts
• ensures that adequate systems, procedures and controls are in place to meet the administration and reporting requirements of the SIS Act and associated legislation
• at the direction of the Audit and Risk Management Committee of the Board, arranges for an independent audit of those systems and controls to be undertaken from time to time
• maintains a system for locating and reporting lost Members.

Collection, banking, recording and maintaining contributions remittances

The basic rate of Member contribution to MilitarySuper is 5% of salary, including higher duties and the Qualification and Skills element of certain Environmental Allowances. Members can elect to contribute up to 10% of salary, and from early in 2005–06 have been able to make additional voluntary pre and post tax contributions. The Employer Benefit is unfunded except for the 3% productivity contribution which is paid into the Fund by the Department of Defence. Members may also be entitled to superannuation co–contributions from the Australian Government.

Total contributions to the Fund during 2008–09 were $347.4m ($298.6m for 2007–08), of which Member contributions comprised $186.5m ($167.5m for 2007–08). Employer contributions amounted to $142.4m ($98.3m for 2007–08). Co–contributions received totalled $18.5m ($32.8m 2007–08). The net appropriation for benefits for the year was $188.3m ($162.7m for 2007–08).

Member and employer productivity contributions for MilitarySuper Members are remitted fortnightly and paid by direct credit to the Board’s bank account.

As the Board’s Scheme Administrator, ComSuper:

• maintains appropriate banking arrangements for the payment of contribution remittances into the Fund
• lodges moneys with the Board’s Custodian for investment by investment managers to the extent that moneys held in the Board’s bank account are not required for the purpose of the payment of benefits and other expenses
• maintains appropriate accounting systems for the recording of contribution remittances received
• monitors the collection of contributions and pursues any late remittance of contributions with the Department of Defence.
  

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Benefit payments

All exiting Members are entitled to a Member-financed benefit regardless of their reason for leaving the ADF. Members are also entitled to an employer-financed benefit, which varies according to the reason for exit.

Member-financed benefits

The MilitarySuper Member benefit is derived from the Member’s own contributions, including any amounts notionally brought over from the DFRDB Scheme, Ancillary Benefits, plus the earnings on those contributions in the Fund. Members can exercise investment choice from the five investment options offered by the Fund for this component of their benefit. The Member benefit is payable as a lump sum, and cannot be converted to a pension.

Employer-financed benefits

MilitarySuper Employer benefits are defined benefits guaranteed by the Commonwealth. Part of the benefit, the productivity benefit, is funded while the remaining balance of the defined benefit is unfunded. The total employer benefit payable is not affected by investment market fluctuations.

Discharge benefits

Members who leave MilitarySuper without a pension entitlement must preserve their total employer component until they reach their compulsory minimum preservation age. From age 55, they can roll it over to another complying fund of their choice until their preservation age is reached and they have retired from the workforce. Member’s who reach age 55 can also convert a minimum of 50% of their Employer Component to a pension and roll over the balance.

Discharging Members may preserve their total benefit or take that part of their Member benefit that accrued up to 30 June 1999. Any contributions paid and earnings after that date must either be preserved in the Scheme or rolled over and preserved in another complying fund until preservation age. Members may withdraw from MilitarySuper part of a Member benefit that is not compulsorily preserved.

Benefits paid 2008-09

Benefits Paid 2007-08

	$m
Pensions	146.2
Lump Sums	88.2
Total	234.4
Fund Share	46.1
Consolidated Revenue Share	188.3
Total	234.4

Payments

All applications for benefits from Contributors and Preserved Benefit Members are processed in accordance with relevant legislation and within the timeframes agreed between the Board and its Scheme Administrator.

Average Time to Process Benefit Payments 2008–09

Early release of preserved benefits

Under certain circumstances, a compulsorily preserved benefit may be paid before retirement.

Of the 307 preserved benefits paid in full or part during 2008–09, 97 were released on permanent physical or mental incapacity, severe financial hardship or compassionate grounds.

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Processing of invalidity Claims

Invalidity benefits

A Member is retired on the ground of invalidity if he or she does not meet the required standard of fitness for retention in the Defence Force, even though he or she may be capable of employment in the civilian workforce.

Invalidity Classification Process

MilitarySuper Members retired on invalidity grounds receive an A, B or C classification of invalidity, dependant upon the extent of his or her loss of capacity to undertake appropriate civilian employment. Class A and Class B classifications denote, respectively, significant and moderate incapacity and attract different levels of pension. Class C classification reflects comparatively low incapacity and a lump sum rather than a pension is payable. If there is a conflict in the medical information, or reasonable doubt as to the classification, the case is passed from the ComSuper delegate to the Incapacity Classification Committee (ICC) for decision. The ICC is established under the provisions of Rule 17 and where required determines the classification of Members retired on invalidity grounds both at the time of discharge and at later reviews of invalidity pension recipients. The ICC made four initial classification decisions during 2008–09.

As at 30 June 2009, the ICC comprised Simon Lawson (Chairperson and Team Leader of Military Invalidity Reversionary and Release Section, ComSuper), Wing Commander Bob Harris (Directorate of Personnel - Air Force), and Ms Heather Gill (Superannuation Directorate, Defence).

After a classification decision has been made, the Member is advised in writing and informed of the right to request reconsideration of the decision.

Invalidity Retirement Classifications

During 2008–09, 533 Members received initial invalidity classifications. Of those who received an invalidity classification, 429 (165 Class A and 264 Class B) became entitled to an invalidity pension. (Note that these figures vary slightly from the number of invalidity exits quoted elsewhere because some of these cases relate to Members who were discharged in a previous financial year). The remaining 104 were classified as Class C incapacity. The proportion of invalidity classifications for each Service is shown in Chart 11.

Service Comparison of Invalidity Classifications 2008-09

Invalidity Classification Review

The Board or its delegates may, at intervals determined by the Board, review the classification of Class A and Class B invalidity pensioners. A Member can also initiate such a review at his or her own request.

The rate of invalidity pension payable to a recipient Member may be altered if the pensioner’s degree of incapacity to undertake appropriate civilian employment deteriorates or improves.

During 2008–09, 352 cases were examined, 32 of which were reviews requested by Members. As a result of these reviews 150 classifications were changed, as shown in Table 15. The ICC made no reclassification decisions during the year.

Invalidity Entitlements Reviewed in the Past Five Years

	2004-05	2005-06	2006-07	2007-08	2008-09
Entitlements examined	829	325	841	353	352
Review with medical exam	274	147	841	353	296
Classification raised	12	34	66	44	134
Classification reduced	121	61	168	92	16
Total classification changes	133	95	168	92	150

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Pensions

Pension variations

Reversionary Benefits

All applications for reversionary benefits following the death of a Member or a Pensioner (that is, eligible spouses, children and orphan pensions) are processed in a timely manner and in accordance with relevant legislation.

MilitarySuper pensions are automatically increased twice yearly in line with any upward movements in the CPI for the period ending 31 March and 30 September each year. The increases are paid on the first pension payday in January and July each year.

In 2008–09, the Australian Bureau of Statistics announced changes in the CPI. The rates were 2.3%% for the July 2008 increase and 2.7% for the January 2009 increase.

Pensioners received statements in July 2008 and January 2009 showing their new rate of pension. Their income tax payment summary and other relevant information were also included with the July statement.

Pension Payments

Employer-financed benefits paid as pension

During the year, 517 new pensions were granted and at 30 June 2009, 7227 Members were receiving MilitarySuper pensions. The total number of Pensioners for each class of benefit is detailed in Table 16 for the end of each financial year since 30 June 2005.

The total amount paid as pensions during the year was $146 196 000. The average pension amounted to $19 690 per annum.

Number of Pensioners Since 30 June 2005, by Type of Benefit

Class of pension benefit	30 June 2005	30 June 2006	30 June 2007	30 June 2008	30 June 2009
Retirement	881	962	1013	1106	1220
Redundancy	1916	1919	1916	1910	1914
Invalidity	2573	2908	3243	3531	3913
Reversionary benefits*	194	213	237	163	180
Total	5564	6002	6409	6710	7227

* payable on the death of a Member, former Member or Pensioner

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Family Law

The Family Law Act 1975 states that where a Member proposes to split his or her superannuation interest, the Trustee of the superannuation fund where the interest is held must be notified and given an opportunity to object to the terms of the split if it wishes. The Family Law Rules 2004 state that the Trustee has a period of 28 days from the date of notification to state its objections.

During the year there was an average of 51 written responses to Members, non-Members and their solicitors per month. All responses were made within the 28 day timeframe.

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Reconsideration of decisions

A person affected by a decision of the Board or a delegate may apply in writing to have the decision reconsidered. If the Board or the Reconsideration Committee took the original decision, the application for reconsideration must be supported by new and relevant evidence. Applications for the reconsideration of a delegate’s decision need not be supported by new evidence. The time limit for requesting reconsideration is within 30 days of receiving advice of the decision. The Board may extend this period in special circumstances.

Requests for reconsideration are investigated in a thorough, objective and effective manner and in accordance with any guidelines issued by the Board.

Requests for reconsideration are treated as complaints for the purposes of section 101 of the SIS Act. During 2008–09, 76 requests for reconsideration of decisions were received, a decrease from the 113 requests received the previous year. Of these, four requests related to reconsideration of a decision of a Reconsideration Committee or the Board compared with seven during 2007–08.

The majority of requests for reconsideration concerned invalidity retirement benefit classification or reclassification decisions, the latter rising, as expected, as the invalidity pensioner membership grows. The primary issue to be determined in these cases is the Member’s level of physical or mental incapacity to undertake suitable civilian employment. Additional medical evidence is usually obtained as part of the reconsideration process.

During 2008–09 a total of 103 cases were finalised, compared with 102 cases in 2007–08 and of these 25 decisions were affirmed and in 42 cases the decision was set aside or varied in favour of the applicant. Another 36 cases were lapsed or withdrawn with the applicant failing to pursue the matter. Thirty–three cases remained under investigation at 30 June 2009.

Following determination of a request for reconsideration each applicant receives a comprehensive written statement of reasons for the decision. Applicants are also advised of further appeal rights.

Reconsideration Applications for the Past Five Years

	2004-05	2005-06	2006-07	2007-08	2008-09
Requests on hand	51	110	73	48	59
Requests received	231	145	108	113	76
Requests resolved	172	182	133	102	103
Carried forward	110	73	48	59	33

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Dispute Resolution

Decisions by the Board and its delegates, including the Incapacity Classification Committee and the Reconsideration Committee, are subject to internal reconsideration by the Board or Reconsideration Committee and external review by the Superannuation Complaints Tribunal. These processes are managed by ComSuper.

External Review

On 29 June 1995, the Trustees of MilitarySuper signed an election to become a regulated superannuation fund for the purposes of the SIS Act. As a regulated fund any decision taken by the Board can be the subject of a complaint before the Superannuation Complaints Tribunal (SCT), which was established under the Superannuation (Resolution of Complaints) Act 1993 (the SRC Act).

Eight complaints were lodged with the SCT during the year and six cases were carried over from 2007-08. Seven complaints were resolved during the year. Of these, five complaints were treated as withdrawn and one decision was affirmed. One complaint was conceded on the basis of new evidence. As at 30 June 2009, there are seven complaints outstanding.

In 2008–2009 there were no applications for review lodged with the Federal Court under the AD(JR) Act in respect of decisions of the Board or its delegates. One Federal Court decision was successfully appealed by the complainant to the Full Court of the Federal Court.

Systems are in place to facilitate the prompt processing of matters that go to the Superannuation Complaints Tribunal, the Federal Court and other jurisdictions such as the Human Rights and Equal Opportunity Commission. The Board also monitors the outcome of external appeals and their implications.

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Enquiries and complaints

The Board has established formal procedures for dealing with Members’ complaints received in accordance with section 101 of the SIS Act. These procedures require the Board Executive to acknowledge and respond to all complaints.

ComSuper’s Compliance Unit has systems in place for dealing with SIS-registered complaints which involve investigating a complaint and preparing a response for the Board Executive to provide to the Member.

ComSuper also handles all Ombudsman enquiries, prepares responses to parliamentary representations and responds to requests made under the Freedom of Information Act 1982 (the FOI Act).

Complaints, ombudsman and parliamentary enquiries

Forty complaints and nine Ministerial representations were received during the year. Two Ombudsman enquiries were received.

A substantial proportion of these complaints related to the employer benefit preservation arrangements as prescribed by MilitarySuper Rules. These are matters that relate to characteristics of the scheme administered, rather than service to Members.

The Board, through its Executive and Audit and Risk Management Committee, monitors all complaints to ensure that ComSuper has internal processes to identify and resolve systemic issues and to continually improve the service provided to Members.

Ministerial Representations relating to military superannuation policy issues are received and responded to within the Department of Defence. In 2008–09 297 Ministerial Representations were received.

There were 68 representations specifically identified as relating to MilitarySuper. These representations were concerned with the method used to index military pensions (40), Maximum Benefit Limits (18), the inability to rollover preserved MSBS benefits (eight) and general queries (two).

One hundred and fifteen respondents requested advice on general military superannuation policy without identifying themselves as MilitarySuper or Defence Force Retirement and Death Benefits (DFRDB) Scheme Members. Of these respondents 64 were concerned with the method used to index military pensions, 11 were concerned with the taxation of military pensions due to the unfunded status of the schemes, five were concerned with the Review of Military Superannuation Arrangements and 38 related to general queries (note: some representations addressed more than one issue).

The remaining 114 representations were in respect of the DFRDB Scheme.

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Legal claims

The Board received no legal claims in the 2008–09 financial year. One claim was carried over from the previous financial year and was not accepted. No claims were unresolved at the end of the financial year.

Freedom of Information

MilitarySuper Members made 47 requests for access to documents during 2008–09. Thirty-four requests were granted in full and 12 partially. One request was withdrawn. No requests were refused.