Superannuation insurance cover:
Pitfall for employees changing employment
The Superannuation Complaints Tribunal (SCT) has reminded
superannuation fund members that they are often obliged to notify
their fund’s trustee of a change in their employment status to
enable the fund to adjust their continuing insurance cover.
Furthermore, the Tribunal warns that continuing insurance cover
via a superannuation fund often ceases shortly after the member
leaves the service of the employer-sponsor.
Improved communication required
In expressing concerns about the number of cases involving the
lack of understanding by members about continuing insurance cover,
the Tribunal has called on trustees to improve their written
communication so that members (and employers) are better informed of
their obligation to notify the trustee in respect of certain events.
SCT Chairman, Mr Graham McDonald, said that, to be effective,
communications issued by trustees must be clear and not assume an
understanding of industry terms, expectations and/or practices.
The Tribunal said it has recently upheld a trustee’s submission
that a member has an obligation to read material sent, and if the
member does not read it, then the member must take responsibility
for the consequences.
In the case mentioned, the Tribunal indicated that the former
employer had not notified the trustee that the member had left its
employment. As a result, member statements issued by the trustee
continued to be sent to the member showing he had continuing
insurance cover, which had in fact ceased 30 days after the member
left the service of the employer.
The Tribunal noted that earlier information provided to the
member consisted of both material giving information about new
services (i.e. promotional material) but much less information
notifying members on issues such as the necessity to notify a change
of employment.
Trustee’s insurance systems
According to the Tribunal, the same case also highlights the need
for trustees to have systems in place to identify accounts where
deductions are being made for the payment of insurance premiums
without there being corresponding contributions in respect of the
member.
In the present case, Mr McDonald said two years had passed during
which statements showing ongoing payments of premiums had been
provided to the member, which led him to the erroneous conclusion
that he had continuing insurance cover. However, during that
two-year period no contributions had been received from the former
employer.
The Tribunal concluded that as well as the employer and member
failing in their responsibilities to notify the trustee of the
change in the member’s employment status, the trustee also failed
to recognise that incoming contributions had ceased. If it had
realised this then it ought to have contacted the former employer
and/or the member to clarify the situation, the Tribunal said.
However, in this particular case, the Tribunal said it was
ultimately unable to provide a remedy, due to unrelated reasons.
Conciliation procedures
In 2004/05, the Tribunal said it experienced a 27.6% increase in
the number of cases being conciliated. As a result of this increase,
the Tribunal has decided that it will change the practice of
approaching parties about their availability for a conference.
Instead of the conciliator contacting parties to establish
suitable times, the Tribunal will decide the date and time and
provide this in a notice to the parties under its powers in section
28 of the Superannuation (Resolution of Complaints) Act 1993.
Normally, several weeks notice will be provided, the Tribunal said.
For the full text of the Chairperson’s Report, see the
Superannuation Complaints Tribunal’s SCT Quarterly Bulletin No.
41, 1 July 2005 – 30 September 2005 available on the SCT
website at: <www.sct.gov.au>.
This article appeared in Thomson’s Weekly
Tax Bulletin (Issue 45, 28 October 2005). Weekly Tax Bulletin is
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