The Matter of the “Missing” Contributions

The Division 2 final salary Defined Benefit Fund was established in 1913. In 1913 the expectation was that most employees would remain employed until the Normal Retirement Age of 65 and so the entitlement accrual rate was based on this assumption.

By the early 1990s it became apparent that very few employees would remain employed with the Principal Employer until the Normal Retirement Age of 65 and that most would leave employment at the Early Retirement Age of 55 if not earlier.

The Division 2 Fund is a hybrid fund were the total benefit consists of:

  • a final salary Defined Benefit, plus
  • a “top-up” Accumulation Benefit.

In a Defined Benefit Fund, assets are not held in the names of individual Members. Assets are held in a common “Asset Pool” with Members benefits determine by a formula in the Governing Rules of the Fund. The benefit amount is not determined by contributions.

If a final salary Defined Benefit has a large surplus no contribution may be required from either Members or the Employer-Sponsor.

In an Accumulation Fund (or money purchase Defined Contribution Fund), each Member has an individual investment account and benefits are determined by contributions and the earnings rate of that particular fund (or sub-funds).

From 1993 are part of “salary packaging” arrangements additional contributions into superannuation were made.

These additional contributions specific to each Members did not go into the common asset pool of the Defined Benefit Fund, since the Fund had a large surplus and the Employer was enjoying an extended “Contribution Holiday“. These additional contributions should therefore have been placed into each Member’s individual investment account in the auxiliary “top-upAccumulation Fund.

Under subsection 1017C(2) of the Corporations Act 2001, a Trustee is required to provide members with Fund Information on which Fund or Sub-Fund contributions were placed and what has been the investment performance of that Fund.

It is a criminal offence under Item 296C of Schedule 3 of the Corporations Act 2001 for a Trustee to refuse to provide such Fund Information.

Repeated requests have been made to the Fund Secretary and the Member-elected Directors of the Trustee Board for Fund Information on which Fund or Sub-Fund these additional contributions have been made and what was the earnings rate of these funds.

Even though it is a criminal offence to refuse to provide this information with a maximum penalty of a fine and two years imprisonment, neither the Fund Secretary nor the Member-elected Directors have been forthcoming with this information. These “top-up” contribution amounts from 1993 with interest added will amount to $100,000s for each Fund Member.

All Members and Beneficiaries of the Division 2 Fund should write to the Fund Secretary and request information in relation to these “top up” contributions in accordance with subsection 1017C(2) of the Corporations Act 2001.

No mention is made of these contributions or the “top-up” benefit on the Member’s Benefit Statement provided by the Trustee to Members

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