The Australian Guardians “Seminar”

Members of the Division 2 final salary Defined Benefit Fund who are still in the service of the Principal Employer were recently subjected to a “Seminar” whose objective was to mislead those Members into relying on what amounts have been included in their “Member Benefit Statements”. Members should be aware that fraudulent “Member Benefit Statements” were produced for several years in the Trio Capital Fraud.

Here is the Australian Guardians Version that provides an overview of the Governing Rules of the Division 2 Fund.

The Australian Guardians – Defined Benefit Fund Seminar

Firstly Members are reminded to always obtain copies of the Trust Deed and Governing Rules and to seek “Independent” legal and financial advice pertaining to their own circumstances.

Superannuation Funds are based on the legal concept of a “trust“. A “trust” is a set of equitable obligations between the Trustees and the Beneficiaries (inc Members) of the “trust“. These equitable obligations are to be found in the Trust Instrument (the Trust Deed and Governing Rules as amended) and the general laws of trusts.

History of your Fund.

The Division 2 final salary Defined Benefit Fund was established by a Deed executed in the State of Victoria on 23 December 1913.

This Fund had accumulated a large surplus and in 1982 had five natural person Trustees:

  •  two nominated by the Employer
  •  two elected by the Members and
  •  one elected by the Pensioners

To allow the surplus to be stripped from the Members’ and Beneficiaries’ Fund by the company executives, a proposal was put to the natural person Trustees to be replaced by an existing corporate Trustee, where all the Directors were nominated by the Employer.

The proposal included increased Member Benefits and Protections.

A key protection was to convert the Fund into a “Deferred Benefits” Fund for those Members who might through no fault of their own be retrenched by the Principal or an associated Employer.

The “Retrenchment Rule” was deleted in a Deed of Amendment (Resolution) executed on 20 December 1982.

The Fund Secretary in a letter dated 21 August 2009 claimed that the Trustee did not have possession of an Deeds of Amendment executed before late 1985! {Refer to the Matter of the “Missing” Fund Documents}

A Member had to initiate legal action against the former Chairman of ASIC in the Federal Court of Australia (VID 323 of 2011) before he was able to obtain a copy of the Deed of Amendment that deleted the “Retrenchment Rule“.

Valid Conditions of Release

If a valid Condition of Release event occurs the Governing Rules of the Fund then Empowers the Trustee (or an agent acting on behalf of the Trustee) to release a lump sum benefit to that Member, once supporting documentation has been received by the Trustee or the Fund Administrator.

The valid Conditions of Release for the Division 2 Fund are:

  • The Member attains the Normal Retirement Age of 65 and is no longer in the service of the Employer
  • The Member dies
  • The Member becomes totally and permanently disabled
  • The Member attains the Early Retirement Age of 55 and voluntarily elects for early retirement
  • The Member resigns from the service of the Employer before the Early Retirement Age of 55

If a Member is retrenched, then the Member retains Membership of the Division 2 Fund until one of the above valid Condition of Release events occurs.

If the Member has attained the Early Retirement Age of 55 then the Member’s Benefit is calculated as:

Final Average Salary” times the “Member’s Benefit Multiple

The Member’s Benefit Multiple is:

  • 15% times years of Membership before 1 July 1993, plus
  • 17.75% times years of membership after 1 July 1993.

in completed months of Membership.

Prior to 31 March 2006 the Governing Rules contained an “Exclusions List” that empowered the Trustee to deduct certain components of remuneration from the amount of remuneration reported to the Australian Tax Office on Payment Summaries (Group Certificates).

The “Exclusions List” included “Overtime payments, Directors fees, special grants, allowances and other amounts“.

This “Exclusion List” was deleted in an Amending Deed executed on 31 March 2006.

Therefore the Trustee (or an agent of the Trustee) is no longer empowered to make any deductions when determining “final salary” from what is reported to the Australian Tax Office.

If the Employer does not provide the correct salary information to the Trustee, the Trustee can at any time seek a Direction and an Order from the Supreme Court of Victoria to compel the Employer to provide that correct information.

The Trustee is required to:

  • act at all times in the best interests of the Members and Beneficiaries,and
  • act strictly in accordance with the Trust Deed and Governing Rules.

The Trustee must act independently and cannot act under the dictation of the Employer’s HR Department.

The only “Direction” the HR Department can give a Trustee of a Government Regulated Superannuation Fund is prescribed by Section 58 of the Superannuation Industry (Supervision) Act 1993 and Regulation 4.03 of the SIS Regulations 1994.

The HR Department cannot instruct the Trustee on how benefits are to be determined {HR Department are in general populated with people of low intellectual calibre so they routinely engage in illegal acts – However there is a well known legal maxim “Ignorance of the law is no excuse”}.

The Trustee must act strictly in accordance with the Trust Deed and Governing Rules unless a deviation is sanctioned by the Supreme Court of Victoria.

Final Average Salary” is therefore the average of the amount reported to the Australian Tax Office in the three years before a valid release event occurs (with some timing adjustment since the financial year ends on 30 June).

If a Member is retrenched “Final Average Salary” is taken over the three years before the date of retrenchment and this amount is then “frozen” until a valid Condition of Release event occurs.

If a Member resigns before the Early Retirement Age of 55, a Member’s Reserve Factor is applied to the benefit amount as calculated above.

The Trustee should be able to provide a Member with a “Reconciliation Statement” showing how the amount reported to the Australian Tax Office can be reconciled with “Final Average Salary“. Remember the Trustee cannot act under the dictation of the Employer’s HR Department.

A Hybrid Fund

The Division 2 Fund is a Hybrid Fund where the total benefit is:

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

The accrual rate of the Defined Benefit Fund was based on the assumption that most employees would remain in the service of the Employer until the Normal Retirement Age of 65.

By the early 1990s it was apparent that this assumption was no longer valid, as it was when employees accepted Offers of Employment, so additional Superannuation Contributions were made for each Employee as part of “salary packaging” arrangements from 1993 onwards.

These individual contributions did not go into the common asset pool of the Defined Benefit Fund, since this Fund had a large surplus of around 40% in 1993 though to the end of the decade.

These individual contributions should have gone into each Member’s Individual Accumulation Investment account along with any additional voluntary “salary sacrifice” contributions made by the Member.

Thus a Member would have a reasonable total benefit, even if they did not remain employed until the age of 65.

The Trustee is required to provide you with information on the fund or sub-fund details and the investment performance of these contributions under subsection 1017C(2) of the Corporations Act 2001.

This is a brief summary of your lawful superannuation entitlements.

Member should always refer to the Trust Deed and Governing Rules since this legal document is the final authority on matters pertaining to the Fund and their entitlements.

Members and Beneficiaries should always seek their own “independent” legal and financial advice concerning matters that pertain to their own circumstances.

The Trustee must provide you with the necessary Fund Documents to enable you to seek this advice as prescribed by Section 1017C of the Corporations Act 2001 and Regulation 7.9.45 and Schedule 10A 11.1 of the Corporations Regulations 2001.

It is a criminal offence if a Responsible Officer of the Trustee contravenes subsection 1017C(2) or subsection 1017C(5) of the Corporations Act 2001 under Items 296C and 297B of Schedule 3 of the Corporations Act 2001.

Members should always consider the Member Benefit Statement provided to them by the Trustee or the Fund Administrator to be fraudulent until the Member has satisfied him or herself that the stated benefit is in fact the Member’s lawful entitlement after many years or decades of loyal service and that a valid Condition of Release event has in fact occurred, empowering the Trustee (or the Fund Administrator acting on behalf of the Trustee) to release the lump sum benefit to the Member.

How confident are Members who are still in the service of the Employer that they will receive their lawful superannuation entitlement when Responsible Officers of the Trustee are prepared to commit criminal offences to prevent the Membership from obtaining copies of the Governing Rules of the Fund and other important Fund Documents?

How confident are Members who are still in the service of the Employer that they will receive their lawful superannuation entitlement when a Member-elected Director who attempted to fulfill his duties exactly in the manner stated by Austin J in Arrakella V Parton (No.2) [2004] NSWSC 605, found himself retrenched with one day’s notice effective the day before he was due to attend his first Board Meeting?

Australian Guardians  – Protecting your wealth when no one else will®

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