Employer

Guide

Issue date: November 2017

This document has been issued by LGSS Pty Limited (ABN 68 078 003 497) (AFSL 383558), as Trustee for Local Government Super (ABN 28 901 371 321). This document contains general information only and is not a substitute for personal advice as it does not take into account any individual’s investment objectives, financial situation or particular needs. Accordingly, an individual should seek professional personal advice and refer to the relevant Product Disclosure Statement at lgsuper.com.au/PDS before making a financial decision.

LGS ePay Your contribution clearing house solutionIn 2011 the Federal Government announced the SuperStream reforms. The reforms were aimed at improving the administrative efficiency of the superannuation industry. Some of these reforms have had a direct impact on how employers pay contributions and interact with super funds.

The data standards make it mandatory for all medium to large employers (defined as an employer with 20 or more staff) to use an e-commerce facility to make contributions and enrol new members in default superannuation funds.

To simplify the process for you, LGS has a web-based contribution clearing-house service, ePay, that can help you streamline the contribution payment process while meeting your SuperStream legislative obligations.

With ePay, you can:

l remit all of your super contributions (including any contributions to other funds) in a single process

l enrol new members

l update member details

l notify LGS of members ceasing employment

l validate and reconcile contributions

l produce reports and audit trails.

ePay helps you manage your super commitments easily and efficiently and with a reduced risk of errors.

If you would like to find out more about ePay contact your LGS client relationship manager.

ContentsIntroduction 1

Membership 2

General information 2Members’ entitlements 3

The Trustee 3

The Administrator 3

Commonwealth legislation 4

Salaries 6

Remitting contributions 6

Contract employees 7

Leave arrangements and the Local Government (State) Award 7

Accumulation Scheme 9Types of member 9

New members 9

The LGS Induction Pack 10

Tax File Numbers 10

Superannuation Guarantee contributions 11

Other concessional contributions 13

Concessional contributions cap 13

Member personal (post-tax) contributions 14

Spouse contributions 14

Non-concessional contributions cap 15

Age based limitations on contributions 15

Government co-contributions 16

Reportable employer contributions 17

Casual employees and employees on leave without pay 17

Terminating employees 17

Further information about the Accumulation Scheme 19

The Executive Scheme 19Transfer to the Accumulation Scheme as an executive officer 19 The Retirement Scheme 21 Introduction

Member defined contributions 23

Additional member contributions 25

Employer contributions 25

The Contributions Due Report 28

Billing multiple 30

Government co-contributions 32

Non-concessional contributions 32

Concessional contributions 33

Benefit Certificate 35

Part-time employees 36

Leave Without Pay (LWOP) 37

‘Superable’ Salaries 40

Members transferring between employers 43

Ceasing employment 44

Executive Officers 44

Members’ entitlements 45

Membership 46

Defined Benefit Scheme 46Defined member contributions 46 Additional member contributions 47Employer contributions 47

Government co-contributions 48

Non-concessional contributions 49

Concessional contributions 49

Superable salaries 51

Benefit Certificate 53

Members transferring between employers 53

Executive officers 54

Leave Without Pay (LWOP) 55

Part-time employees 57

Tax File Numbers 57

Contact details 58Employer contact information 58

General contact information 58

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This Employer Guide is to assist employers as defined by the Local Government Super Trust Deed. An “Employer” is someone who works within or is associated with the NSW local government sector.

The Guide can assist staff directly involved in fulfilling the employers super obligations (e.g. payroll managers) under both Commonwealth legislation and the Local Government Super (LGS) Trust Deed.

Important Note

This Guide is not intended to be a substitute for each LGS Product Disclosure Statement (PDS). You should not provide advice to employees about their LGS benefit entitlements.

Each PDS is available on the LGS website at lgsuper.com.au/PDS or from Member Services.

For more specific information about benefit entitlements, please advise employees to contact Member Services on 1300 LGSUPER (1300 547 873).

Introduction

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General informationMembership

LGS was established on 30 June 1997 as the Local Government Superannuation Scheme (Fund). At that time, employees of NSW local government employers were transferred from one of the existing ‘State Super’ schemes to the new LGS equivalent of that scheme (Division), as shown below:

State Super scheme Transferred to LGS

First State Super Accumulation Scheme (Division A)

State Authorities Superannuation Scheme (SASS)

Retirement Scheme (Division B)

State Authorities Non-Contributory Super Scheme (SANCS) (commonly known as ‘Basic Benefit’)

Basic Benefit Scheme (Division C)1

State Superannuation Scheme (SSS) Defined Benefit Scheme (Division D)

Public Sector Executive Superannuation Scheme (PSESS)

Executive Scheme (Division E)2

1. A Basic Benefit account is now held only by current (or some former) members of the Retirement Scheme and Defined Benefit Scheme.

2. The Executive Scheme was closed effective 30 June 2013.

Each of the LGS divisions was established with identical conditions to those in the corresponding State Super scheme, although some significant differences have since evolved.

The Retirement Scheme and Defined Benefit Scheme are closed to new members. Ordinarily, new employees would now join the Accumulation Scheme, unless:

lThey have recently ceased employment with a State Super employer, where they were a contributory member of SASS or SSS. Subject to certain conditions, they may be able to join the Retirement Scheme or Defined Benefit Scheme respectively under ‘mobility’ provisions.

lThey have recently ceased employment with an Energy Industries Superannuation Scheme (EISS) employer, where they were a contributory member of the EISS Retirement Scheme or EISS Defined Benefit Scheme. Subject to certain conditions, they may be able to join the LGS equivalent of that scheme.

For new employees, it is recommended that they first ensure that neither of the above points apply before they establish their memership in the Accumulation Scheme. Further information on how to deal with a new employee, who is eligible for Retirement Scheme or Defined Benefit Scheme membership, can be found in the corresponding section of this Employer Guide.

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Choice of fund

When the Superannuation Choice legislation took effect in July 2005, employers were not required to offer a choice of fund to their employees when the contributions were made under or in accordance with the state award. Councils that are not constitutional corporations are covered by the terms and conditions of the Local Government (State) Award and are not required to offer a choice of fund, but may choose to do so upon receiving a request from an employee.

Members’ entitlements

The main features of the fund are provided in the PDS, which is available at lgsuper.com.au/PDS

Employers who are asked about members’ entitlements and options should refer members to the information available at lgsuper.com.au or from Member Services, but should not offer any additional information. It is particularly important that no assurances should be given that exiting members will be entitled to a particular benefit.

Trustee

The Trustee is LGSS Pty Limited, ABN 68 078 003 497.

The directors are:

Employer representatives Employee representatives

Bruce Miller – Local Government NSW (Chair)

Craig Peate – United Services Union (Deputy Chair)

Domenico Figliomeni – Local Government NSW

Gregory (Greg) McLean – United Services Union

Karen McKeown – Local Government NSW

Gordon Brock – Local Government Engineers’ Association

Sam Byrne – Development & Environmental Professionals’ Association

Administrator

Administration services for LGS are provided by Australian Administration Services Pty Limited (AAS).

The administrator undertakes the following responsibilities:

l Maintains all member records relating to all divisions.

l Collects contributions relating to all divisions and pays benefits in accordance withthe Trust Deed.

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lProvides members of all divisions with member statements and other information as specified by the Trustee.

lMaintains bank accounts and accounting records relating to all divisions.

lProvides and maintains information services for members and employers as required by the Trustee.

lAdministers claims for invalidity and death benefits for the divisions.

Commonwealth LegislationSuperannuation Guarantee (SG)

Under SG legislation, employers are required to fund a minimum level of superannuation benefits for all eligible employees. The Fund Rules are designed to ensure that this requirement is met by employers.

Further information is set out in the section of this Guide that relates to each division of LGS. However, there are significant differences in the way employer obligations are to be met in the Accumulation Scheme and the divisions containing defined benefit elements (i.e. Retirement Scheme and Defined Benefit Scheme).

Superannuation Industry Supervision (SIS) Standards

The SIS standards generally apply to the obligations placed on superannuation funds. However, the contribution standards also impose an obligation on employers to pay any personal member contributions into a superannuation fund within 28 days after the end of the month. Those contributions are deducted from the employee’s salary (irrespective of whether or not these deductions have been made from pre-tax or post-tax salary). They also define the circumstances under which contributions can be accepted in respect of individual employees.

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Taxation

With regard to superannuation, the taxation legislation generally imposes its obligations on superannuation funds, not on employers. However, please be aware that:

lemployer contributions (concessional contributions) are generally taxed at 15% up to the concessional cap, upon receipt by LGS. The exception to this is in respect of employees earning $300,000 or more, who may have some or all of their concessional contributions taxed at 30%.

lnon-concessional (post-tax) contributions will not be taxed upon receipt by LGS. However, non-concessional contributions in excess of the non-concessional cap will be identified by the Australian Taxation Office (ATO) after the end of the financial year and taxed to the member at the highest marginal rate plus Medicare levy.

More information on concessional contributions, non-concessional contributions, their respective caps and how they apply to each division of LGS, can be found in the corresponding sections of this Guide.

Superannuation benefits may be subject to tax at the time they are paid by LGS.

Other taxes may also apply, such as tax on investment earnings (which is factored into the investment return credited to members) and GST (which affects the fees paid by LGS to various service providers).

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SalariesThe salaries on which compulsory contributions (both employer and employee) are based vary between divisions and between different classes of employee.

Details of the salary bases in each division are set out in the relevant sections of this Guide.

It is important for employers to note the calculation methodology to determine superable salary can also vary between the different divisions. Please refer to the Employer section of the LGS website for more information.

Remitting contributionsUnder LGS rules, employers are required to pay all contributions to LGS by no later than the 28th of the month following the month for which those contributions apply.

Contributions can be remitted weekly, fortnightly or monthly via:

lePay – LGS’s clearing house service. Please refer to the inside front cover of this Guide for more information, or

lElectronic Funds Transfer (EFT) – please refer below for bank details.

To ensure the correct allocation of contributions and accurate reporting to the ATO, it is essential that all contributions are clearly identified by type and recipient.

Payment detailsContributions should be remitted as follows:

Accumulation SchemeBy EFT: Local Government Super BSB: 062 000 Account: 1046 6118

Retirement Scheme, Defined Benefit Scheme and Basic BenefitBy EFT: Local Government Super BSB: 062 000 Account: 1045 6980

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Contract employeesThe Fund Rules define certain employer obligations in meeting the superannuation liabilities of their contract employees. However, they do not address the issue of whether or not the employer is entitled to recover all or any of the superannuation payments made out of the contracted employees’ salary packages.

This issue is one that regularly leads to disputes. It is suggested that these disputes could be avoided if an employee’s liability to meet the employer’s superannuation contribution is defined in the individual’s employment contract.

Leave Arrangements and the Local Government (State) AwardUnder the Local Government (State) Award 2014, employers may provide an employee with certain benefits in respect of their leave entitlements. These are highlighted below:

Purchased leave arrangements

An employer may provide an employee with access to purchased additional leave arrangements to enable them to attend to work and family responsibilities.

Because these arrangements are likely to have super implications, the way in which an employer chooses to deal with purchased leave arrangements for individual employees in respect of their super is likely to differ between the various LGS divisions.

For more information, please refer to the ‘Purchased leave arrangements’ guide at lgsuper.com.au/PLA

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Long service leave taken at half pay or double pay

The Local Government (State) Award 2014 also allows for an employer to consent to an employee taking any long service leave entitlement at half pay or double pay.

As with the purchased leave arrangements discussed on the previous page, the way in which an employer chooses to deal with a case of long service leave at half or double pay is likely to differ between LGS Schemes.

There was an amendment on 1 July 2016 to the Local Government (State) Award 2014, which allows employees to recieve some of their accured long service leave as income while salary sacrificing an equivalent amount into a LGS account.

For more information, please refer to the ‘Long Service Leave and Salary Sacrifice’ fact sheet available at lgsuper.com.au/factsheets

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Types of members

The Accumulation Scheme has three types of members:

1.Full member – Members whose employers are meeting their SG obligation by making compulsory employer contributions to the Accumulation Scheme. This group now includes former contributory members of the Local Government Executive Scheme, who were transferred as full members following the closure of the Executive Scheme on 30 June 2013.

2.Optional member – An optional member account may be held by a member of another LGS Division (i.e. the Retirement Scheme) in order to make or receive additional contributions or rollovers from other funds and/or take up voluntary insurance with LGS, but not to receive compulsory employer contributions. This group may also include optional members who transferred from the former Executive Scheme.

3. Member of the Public Offer Division – Mainly members who have ceased employment with an LGS employer and want to retain their contributory membership of LGS. This group may also include inactive members of the former Executive Scheme who, prior to its closure, were transferred to the Public Offer Division.

As well as being able to continue to accept contributions from the member, the Public Offer Division can generally accept contributions from any non-LGS employer.

New members

Prior to establishing a membership of the Accumulation Scheme for a new employee, it is recommended that you ensure that they are not an existing member of EISS or SSS, as they may be able to transfer the existing membership to LGS.

It is not compulsory for the employee of an LGS employer to complete an application form to join the Accumulation Scheme. However, you need to provide each new Accumulation Scheme member with an LGS induction pack; the task of enrolling an employee to the Accumulation Scheme is usually carried out by the employer.

Please forward all details of new members to LGS either before or at the same time as the first payment of compulsory contributions is made. This allows the administrator to establish a new account, allocate the contributions and contact the new member as soon as possible.

Also ensure that you identify any new casual employees on your new employee listing. This will alert us to the potential of there being prolonged periods where no contributions are received and help prevent the member’s account becoming ‘inactive’.

Employers are also required to provide to LGS the Tax File Number (TFN) of any new member.

Accumulation Scheme

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The LGS Induction Pack

When enrolling new employees into the Accumulation Scheme, in addition to providing the new member information specified, please provide new members with an LGS induction pack.

The pack contains general information on LGS and the benefits of membership. The pack also includes a Transfer-in Authority form to allow any super held with other funds to be consolidated in the new Accumulation Scheme account.

If you need a supply of the LGS induction packs, please contact your LGS client relationship manager.

Tax File NumbersIf you are in possession of an employee’s TFN, you are required by law to pass it to their super fund within 14 days of receiving their TFN declaration form.

If LGS does not hold a valid TFN for a member, the following may apply:

lExtra tax is likely to be payable on any concessional contributions made by the member.

lLGS cannot accept non-concessional contributions from the member.

lThe member may miss out on any government co-contribution payments they may otherwise have been entitled to.

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Superannuation Guarantee (SG) contributionsUnder the SG legislation most employees are entitled to a minimum level of employer superannuation contributions, known as SG contributions.

The amount an employer is required to contribute is based on a percentage of Ordinary Time Earnings (refer to the next page).

The historical SG rates and proposed future increases are shown below:

Date SG Rate

1 July 1992 to 31 December 1992 4%

1 January 1993 to 30 June 1995 5%

1 July 1995 to 30 June 1998 6%

1 July 1998 to 30 June 2000 7%

1 July 2000 to 30 June 2002 8%

1 July 2002 to 30 June 2013 9%

I July 2013 to 30 June 2014 9.25%

I July 2014 to 30 June 2021 9.5%

I July 2021 to 30 June 2022 10%

I July 2022 to 30 June 2023 10.5%

I July 2023 to 30 June 2024 11%

I July 2024 to 30 June 2025 11.5%

I July 2025 onwards 12%

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From 1 July 2013 the upper age limit on SG contributions (i.e. age 70) was removed. Employers are required to contribute for eligible employees aged 70 and above.

Ordinary Time Earnings (OTE)

OTE is generally defined as the amount employees earn for their normal hours of work, including amounts such as paid leave, shift loading and some allowances.

OTE generally does not include amounts earned outside of an employee’s normal hours of work. Payments such as those for overtime or untaken leave paid as a lump sum are not considered to be OTE.

Under a NSW State Government recommendation, employers may be required to make SG contributions in circumstances where the SG legislation normally provides an exemption.

This includes:

lwhen an employee’s earnings are less than $450 per month

lwhen an employee under 18 years of age has been employed for less than 30 hours a week, and

lwhen an employee’s annual earnings exceed the ‘maximum earnings base’ ($51,620 per quarter for the 2016/2017 year).

An employer cannot use an earnings base other than OTE to calculate SG contributions. For example, you cannot use an industrial award, existing employer agreement, a super fund’s trust deed or a law of the Commonwealth, state or territories.

OTE is defined in Super Guarantee Ruling SGR 2009/2, a copy of which can be found on the ATO website at ato.gov.au

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Other concessional contributions

In addition to SG contributions, employers may make other concessional contributions for members. Generally, these would be either:

lfurther compulsory contributions under an industrial agreement or award (commonly referred to as award contributions), or

loptional member contributions, made under a salary sacrifice arrangement.

Plese refer members requiring more information about the benefits of making salary sacrifice contributions to the Accumulation Scheme ‘Make your super count’ booklet. This booklet is available at lgsuper.com.au/factsheets or from Member Services.

Concessional contributions cap

All pre-tax contributions paid on behalf of employees, including member salary sacrifice contributions, are classified as concessional contributions.

Most concessional contributions are subject to a contributions tax deduction of 15% when LGS receives them. For this reason, it is important that all concessional contributions are clearly identified as such when they are remitted.

Concessional contributions made for employees earning $300,000 or more per annum may be taxed at 30% for some or all of the contribution, but any additional tax will be recovered by the ATO after the end of the financial year.

LGS, like all other super funds, is required to report the total amount of concessional contributions received per member for each financial year, as there is a limit (‘cap’) on the amount of concessional contributions an individual can make each year.

The standard concessional cap is $30,000 per annum and applies to all members who are less than 49 years old on the last day of the previous financial year.

For the 2016/17 financial year a $35,000 cap applies for members who are at least 49 years old on the last day of the previous financial year.

The concessional cap applies across all super funds held by an individual, not just those held with LGS. At the end of each financial year, any concessional contributions identified by the ATO as in excess of that member’s concessional cap may be withdrawn by the member and will be taxed at the member’s marginal rate, to mirror the tax treatment those funds would have received under PAYG arrangements. An interest payment may also apply, in recognition of the fact that the tax on excess contributions is being collected later than the PAYG tax would have been.

Please refer members needing more information on concessional contributions and the concessional cap to the Accumulation Scheme ‘How Super Works’ Fact Sheet, available at lgsuper.com.au/PDS or from Member Services.

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Member personal (post-tax) contributions

Employees may elect to make their own personal contributions to the Accumulation Scheme from post-tax salary. These are classified as non-concessional contributions and are subject to a cap (please refer below).

Pay as you go (PAYG) tax has been applied to these contributions prior to being remitted to LGS. Therefore, they are not subject to further tax once they are received.

Spouse contributions

An employee of an LGS employer may make post-tax contributions to the Accumulation Scheme on behalf of their spouse. The spouse does not need to be an existing member of an LGS scheme nor the employee of an LGS employer.

Contributions made on behalf of a member’s spouse must be deposited to an Accumulation Scheme account held in the spouse’s name and be clearly identified as such.

As with a member’s own post-tax contributions, spouse contributions are classified as non-concessional contributions and are subject to a cap (please refer to the next page).

Spouse contributions can be accepted up to age 65 and between ages 65 to 70 if the spouse satisfies the work test (please refer to the next page). LGS can’t accept spouse contributions once a spouse reaches age 70.

Please refer members requiring more information about spouse contributions to the Accumulation Scheme ‘How super works’ Fact Sheet, available at lgsuper.com.au/PDS or from Member Services.

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Non-concessional contributions cap

A cap is imposed on the total amount of non-concessional contributions that a member can make in each financial year. It is set at six times the concessional cap (currently $180,000) and will increase only if/ when the standard concessional cap is increased.

LGS is required to report the total amount of non-concessional contributions received per member, for each financial year.

Please note that:

lthe annual cap of $180,000 per annum can be brought forward over three years (i.e. $540,000) for members less than age 65 (or for members aged 65 and over, in certain circumstances)

lNon-concessional contributions in excess of the cap will be taxed to the member at the highest marginal rate, plus Medicare levy

lcontributions made by a member on behalf of their spouse will be counted towards the recipient’s cap

lmembers cannot make non-concessional contributions to LGS if their TFN has not been provided to LGS.

Please refer members requiring more information about non-concessional contributions and the non-concessional cap to the Accumulation Scheme ‘How Super Works’ Fact Sheet, available at lgsuper.com.au/PDS or from Member Services.

Age based limitations on contributions

Members aged 65 to 74 who wish to make non-mandated contributions (i.e. post-tax, salary sacrifice or spouse contributions) must satisfy the work test for each financial year in which these contributions are made.

To satisfy the work test the member must be able to declare that they have worked at least 40 hours in a period of not more than 30 consecutive days in the financial year.

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LGS will write to members in this age band up to twice per financial year. We may also contact an employer, if we can’t ascertain whether or not an employee has satisfied the work test. If a member is unable to satisfy the work test for a financial year, any non-mandated contributions made in that financial year must be refunded.

Non-mandated contributions cannot be accepted for members aged 75 or over.

Government co-contributions

The Commonwealth Government makes co-contributions to the Accumulation Scheme account of an eligible member based on the amount of personal (post-tax) contributions that member has made in a financial year.

In addition to making at least one post-tax contribution in a financial year, in order to qualify for co-contributions, the member must:

lhave a total income (assessable income plus any reportable fringe benefits) of less than $51,021

lhave earned at least 10% of the total income from eligible employment, running a business or a combination of both

lnot have held any eligible temporary resident visa at any time during the year

lhave lodged an income tax return for the financial year in which the contributions were made

lbe less than 71 years old at the end of the year in which the contributions were made.

The government will contribute up to 50c for every $1.00 contributed, up to a maximum of $500 where the contributor’s annual income is less than $36,021.

The co-contribution amount phases out as the member’s income increases and no longer applies where the member’s annual income is $51,021 (this is known as the ‘higher income threshold’) or more.

The minimum co-contribution amount paid by the Government is $20.00.

Co-contributions are not subject to contributions tax when received by a super fund, but they do not count towards the member’s non-concessional cap.

Members requiring more information about co-contributions should be referred to the Accumulation Scheme ‘How super works’ Fact Sheet and ‘Make your super count’ booklet available at lgsuper.com.au/PDS or from Member Services.

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Reportable employer contributions

Employers are required to include reportable employer contributions on PAYG payment summaries for their employees.

Reportable employer contributions refers to any member pre-tax (salary sacrifice) contributions made in the financial year to which the PAYG payment summary relates. SG contributions, award contributions or any other pre-tax contributions which the employer has elected to make for its employees are not considered to be reportable employer contributions and should not be included.

If you have any queries as to what should or should not be included as reportable employer contributions, please contact the ATO directly.

Casual employees and employees on leave without pay

It is important that LGS is advised of any casual employees and those who have undertaken an extended period of leave without pay (e.g. maternity leave).

Generally, if an Accumulation Scheme account has not received contributions for a period of three months, it is assumed that the member has ceased LGS employment and the account is deemed to be inactive. Inactive accounts are transferred to the Accumulation Scheme Public Offer Division.

When we are aware that employees have taken leave without pay, or that they are casually employed, we can prevent the account from being deemed inactive.

Terminating employees

Members terminating employment with their LGS employer may be entitled to be paid some or all of their Accumulation Scheme benefit, subject to the Superannuation Industry (Supervision) Act (SIS)preservation rules.

They may also choose to transfer to the Public Offer Division of the Accumulation Scheme or rollover their benefit to another super fund.

To ensure the timely processing of a benefit payment or rollover, please advise us of the termination (via ePay or a completed Employment Termination Advice form) as soon as possible after employment has ceased.

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Ensuring that all final contributions have been remitted promptly greatly assists with the timely processing of benefits. However if there are any contributions outstanding, please advise on the Employment Termination Advice when the final contribution(s) will be made.

If employment has ceased due to invalidity, the employer is required to complete the Employer Statement section of the members’ Application for an Invalidity Benefit Payment form.

Please direct members needing further information about the payment of benefits and the SIS Preservation Rules to the Accumulation Scheme ‘How super works’ Fact Sheet. Further information about the tax payable on benefits can be found on the ‘How super is taxed’ Fact Sheet. Both Fact Sheets are available at lgsuper.com.au or from Member Services.

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Further information about the Accumulation Scheme

Further information about the Accumulation Scheme, including fees, investment options and benefits can be found in the PDS available at lgsuper.com.au/PDS

Additional material, incorporated by reference into the PDS, is available in the form of PDS Fact Sheets. These are as follows:

1. About Local Government Super (LGS) Accumulation Scheme 2. How super works 3. Benefits of investing with LGS Accumulation Scheme 4. Risks of super 5. How we invest your money 6. Fees and costs 7. How super is taxed 8. Insurance in your super 9. How to open an account 10. DIY investment option Product Guide

Executive SchemeThe Executive Scheme (Division E) was an accumulation-style scheme, open to lo-cal government employees confirmed as executive officers. Members of other LGS divisions were able to transfer their contributory membership of that division to the Executive Scheme.

The Executive Scheme closed effective 30 June 2013 and its contributory members were transferred to the Accumulation Scheme.

Transfer to the Accumulation Scheme as an executive officer

Members of the Retirement Scheme and Defined Benefit Scheme who are confirmed as executive officers can elect to transfer their contributory membership to the Accumulation Scheme.

An executive officer includes any of the following:

lA chief executive officer (under public sector specifications)

lA senior executive officer (under public sector specifications)

lAn officer nominated under Section 11A of the Statutory and Other Officers Remuneration Act 1975 (NSW) or

lA person who is nominated by their local government employer and who satisfies the following requirements:

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(a) occupies a senior position, and is receiving a salary equivalent to or greater than the executive band of the Local Government (State)Award

(b) is on a fixed term contract of employment.

In order to transfer their contributory membership of the Retirement Scheme or Defined Benefit Scheme, employees must elect to join the Accumulation Scheme within two months of becoming an executive officer.

In order to effect the transfer, the following forms are required:

lA Certificate of Executive Status form, completed by the employer, to confirm that the employee is eligible

lAn Accumulation Scheme Application for Membership form, completed by the employee

lA Retirement Scheme or Defined Benefit Scheme Election to Transfer/Defer Accrued Benefits form.

Once an executive officer has transferred contributory membership of the Retirement Scheme or Defined Benefit Scheme to the Accumulation Scheme, they have the option of leaving their existing benefit in that division as a deferred benefit or they can elect to have it transferred to their new Accumulation Scheme account.

It is recommended that any executive officers who are members of the Retirement Scheme or Defined Benefit Scheme and are considering joining the Accumulation Scheme contact Member Services.

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The Retirement Scheme Introduction

Membership

Almost all Retirement Scheme members were originally members of the State Authorities Superannuation Scheme (SASS) and were compulsorily transferred to the Retirement Scheme on 1 July 1997, or have subsequently transferred their membership after commencing employment with an LGS employer. The Retirement Scheme closed to new members in 1992.

Earlier schemes

There are a number of special provisions that apply to members who originally joined one of the schemes which preceded the establishment of SASS in 1988. A brief summary of these older schemes and the additional entitlements they carried into the Retirement Scheme are as follows:

NSW Retirement Fund (NRF) lSpecial contribution points up to age 45

lPension options under some circumstances

lMinimum benefits payable on death or invalidity.

Local Government Insurance FundlMinimum benefits payable on resignation, dismissal, discharge, retirement, death

or invalidity.

Local Government Provident FundlMinimum benefits payable on resignation, dismissal, discharge, death or invalidity.

Local Government Benefits FundlMinimum benefits payable on retirement, death or invalidity

lSome female members have a retirement age of 55

lSome former Sydney Electricity employees have a retirement age of 55.

Local Government Pension FundlPension options under some circumstances

lMinimum benefits payable on death or invalidity

lChildren’s pensions payable on death

lAdditional benefits payable on death or invalidity under some circumstances

lAdditional benefits payable to age 60 under some circumstances.

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Public Authorities Superannuation Scheme (PASS)lAdditional benefits payable to age 60 under some circumstances.

State Public Service Superannuation Fund (SPSSF)lBenefit points have higher nominal value of 3% of salary

lRetirement age is 55

lMaximum points to age 55 is 162

lCan accrue a maximum of six points per year between ages 56 and 58.

Transport Retirement FundlPension options under some circumstances

Employees who request further information on these entitlements and whether or not they apply to their Retirement Scheme membership should contact Member Services.

Benefit Structure

The Retirement Scheme is a split-benefit or hybrid scheme–it is a mixture of accumulation and defined benefits. Upon exiting the Retirement Scheme a member is entitled to a lump sum comprising:

lA Contributor Financed Benefit (CFB), which is made up of defined member contributions and their investment earnings, less fees and charges. It is an accumulation style benefit component.

lAn Employer Financed Benefit (EFB), which is a defined benefit, funded by the employer and calculated at the time of exit.

lA Basic Benefit (BB), which is technically not part of the Retirement Scheme (it is Division C) but it is generally viewed as part of a Retirement Scheme benefit. The BB may consist of two parts:

(1) A defined BB, set at 3% of a member’s salary at exit for every superable year (or part-year) of service since 1 April 1988.

(2) An accumulation component, known as the Other Contributions (OC) account, which accepts payments such as co-contributions, 180 Benefit Points contributions, award contributions, other top-up contributions and rollovers.

In the case where the Retirement Scheme benefit payable is due to Death or Total and Permanent Invalidity (TPI) and the member was paying a monthly premium, a further component known as Additional Benefit Cover may also be payable.

Retirement Age

The early retirement age is 58 for most members. However, some may be entitled to a Retirement benefit at age 55.

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Super year versus financial year

The Retirement Scheme’s ‘super year’ runs from 1 April to 31 March, with each calendar month representing a contribution period.

However, in terms of providing members with benefit statements and declaring investment returns, the Retirement Scheme adheres to the standard financial year.

Member defined contributions

Effective each 1 April, members may elect to contribute a specified percentage of their Superable Salaries for the next super year. For most members, the contribution range is between 1% and 9% (in whole numbers only).

Prior to 1 April each year, members are sent a letter to offer them the opportunity to change their rate of contribution. If they complete the enclosed form and return it to LGS (usually the deadline is the end of February) their rate will be altered from 1 April. If the form is not returned, the rate will remain the same as the previous super year.

The Superable Salary used to calculate the new contribution from 1 April is the salary actually in payment to the member on the 31 December immediately preceding 1 April (refer to page 40 for further information).

Employers will be contacted at the beginning of each calendar year and asked to provide Superable Salary information for each member as at the preceding 31 December (the deadline is usually the end of January).

Using the contribution rate obtained from the member and the Superable Salary information provided by the employer, the administrator will calculate each member’s new monthly contribution and forward it to each employer prior to 1 April each year via the annual ‘Member Checklist Report’ (commonly referred to as the checklist or pre-list). Throughout the year, commencing each April, the employer will also receive a monthly Contributions Due Report, containing details of the required contributions (both member and employer) for each employee.

The employer is required to deduct the member contributions from the member’s pay on an ongoing basis and forward them to LGS, along with the corresponding employer contributions.

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Calculating member contributions

Member contributions for each month are calculated by multiplying the attributed full-time salary as at 31 December by the Salary Ratio1 and the employee’s contribution percentage rate and then dividing by 12:

Attributed full time salary x salary ratio x contribution rate12

In the example below, the attributed full-time salary advised by the employer is $71,056 and the member, who is working full time, has elected to contribute at a rate of 9%:

$71,056 x 1.0000 x 9% = $532.9212

The employer is required to deduct from this member’s pay, the equivalent of $532.92 per month for the next 12 months.

The above example is provided for your information only. You are not required to calculate an employee’s contribution for each month. This information will be provided to you by the administrator via the monthly Contributions Due Report (‘bill’).

Deducting employee contributions

Most LGS employers run fortnightly payroll cycles, which don’t directly correspond with the Retirement Scheme’s monthly calendar cycle. The most popular methods used by LGS employers to meet the challenge of deducting a monthly amount from fortnightly pay are as follows

a) Multiply the monthly rate by 12 to revert to an annual amount, then divide by 26 or 27, depending on how many pay days there are for the next super year.

b) Deduct half of the monthly contribution amount for each of the two pay periods in a month and make no further deduction on a third payday in any month.

Depending upon the arrangements made between you and your employee, contributions can be made from pre-tax salary, via salary sacrifice or a combination of both.

Remitting employee contributions

Under Commonwealth legislation and the Retirement Scheme rules, once deducted, the contributions must be forwarded to the administrator by no later than the 28th day of the following month. Please refer to page 6 for more information on how to remit contributions.

1. For full-time employees, the salary ratio is 1.0000. Please refer to section page 36 for further information about the salary ratio and part-time employment.

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Additional member contributions

Since 2005, Retirement Scheme members have been able to make top up contributions (pre-tax or post-tax) over and above the maximum 9% defined contributions.

However, these additional contributions do not count towards the defined benefits of the Retirement Scheme. Instead, they are invested in the accumulation-style Other Contributions account.

The Other Contributions account is also able to accept additional employer contributions, Government co-contributions and rollovers from other super funds.

Employer contributions

Under the LGS Trust Deed, the employer is required to make certain contributions to the Retirement Scheme on a monthly basis:

lDefined contributions to fund the Employer Financed Benefit (EFB)

lContributions to fund the defined Basic Benefit

l180 Benefit Points contributions to a member’s Other Contributions (OC) account

lAdditional Employer contributions (where required) to supplement the defined contributions made in respect of the EFB.

Contributions to fund the Employer Financed Benefit (EFB)

The monthly contribution required to fund each member’s EFB is based on a direct multiple (known as the billing multiple) of the member’s own monthly contribution.

Although the multiple used has changed several times in recent years, based on actuarial recommendations the current long-term funding multiple is 1.9. The employer is required to contribute at a rate of 1.9 times the member’s contribution. This amount is calculated by the administrator and included in the monthly Contributions Due Report issued to employers.

Although the employer’s EFB contributions are based on a multiple of each member’s own contribution, they are not paid directly to each member’s account. Instead, they are paid into a pool of funds (known as the Employer Reserve) and are used to fund each EFB as members exit the Scheme.

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Since 1 July 2011 the total monthly contribution of 1.9 times each member contribution has been supplemented by a single, actuarially-determined lump sum amount. This additional employer contribution is confirmed on the Monthly Contributions Due Report.

When a member has accrued 180 benefit points (i.e. the maximum permitted) over a period of 30 years or more, the employer is no longer required to contribute towards their EFB. Instead, the employer is required to contribute to the Other Contributions account (please refer to the next page).

As the EFB is a defined benefit and is based on certain variables (including the member’s own long-term contributions), the contributions made by an employer for each member do not directly represent the EFB payment each member receives when they exit the Retirement Scheme.

Contributions to fund the defined Basic Benefit (BB)

The monthly contribution required to fund each member’s defined BB is based on a percentage of the member’s current Superable Salary (as at the last 31 December).

Although the percentage has changed in recent years, based on actuarial recommendations the long-term funding rate is currently 2.5% per annum.

The monthly amount representing the defined BB contribution for each member is reflected in the monthly Contributions Due Report.

Like the EFB contributions, BB contributions are not paid directly to each member’s account. Instead, they are paid into the Employer Reserve and fund each BB as members exit the Retirement Scheme.

Contributions for members with 180 Benefit Points

Since 1 July 2008, employers are no longer required to contribute towards the EFB for an employee who has reached the maximum 180 Accrued Benefit Points in the Retirement Scheme.

Instead, a monthly contribution based on a percentage of each applicable member’s Superable Salary is required. This amount appears on the monthly Contributions Due Report as ‘180 Benefit Points’ contribution.

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Although a defined contribution, the 180 Benefit Points contributions are not paid into a pool of funds like other defined employer EFB and BB contributions. Instead, they are paid directly to each member’s Other Contributions account and are invested for the member.

For this reason, it is important that the 180 Benefit Points contributions are clearly identified when remitted to LGS.

Employers are still required to pay the defined Basic Benefit (BB) contribution for members with 180 Accrued Benefit Points.

The formula used to calculate the 180 Benefit Points contribution is as follows:

SG Rate (%) – 2.5% (BB Contribution)

The contribution rate is currently 7.00% of Superable Salary. Increases to the 180 Benefit Points contribution occur in line with any future increases to the rate of SG.

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The Contributions Due Report

To assist with meeting your Retirement Scheme contribution obligations, LGS provides each employer with a monthly Contributions Due Report (commonly referred to as the employer bill).

The Report currently consists of the following five parts:

1. Contributions received

This section summarises, on a month-by-month basis, the total defined contributions received for the financial year to date, namely the defined member (CFB, pre-tax and post-tax) and employer (EFB), defined Basic Benefit (BB) and 180 Benefit Points contributions.

This section includes any Additional Employer, pre-tax top up, post-tax top up contributions, plus any genuine Award contributions.

2. Contributions due

This is the main body of the report and lists, on a member-by-member basis, all defined contributions due in respect of each member.

The defined member CFB and employer EFB, BB and 180 Benefit Points contributions due for the current month are included, as well as any adjustments made in respect of arrears (normally relating to previous short-payments) and credits (usually for previous over-payments).

Positive and negative adjustments made to the monthly Report are often due to mid-year changes to a member’s employment circumstances, such as a change in hours worked or a period of non-prescribed leave without pay.

The Contributions Due Report combines any adjustments and arrears into a single amount labelled ‘Arrears/Adjustments’. Any credit remaining for a member is offset against the following month’s due amount for that member.

Exited members are not included in the Report, irrespective of whether or not any outstanding credits or arrears exist. Any arrears or credits in respect of the EFB, BB and 180 Benefit Points contributions are offset against the additional employer contributions due for that month.

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3. Additional employer contributions/contributions due summary

This provides an overview of all amounts due, paid and outstanding.

The ‘additional employer contributions’ section displays the monthly due amount, any arrears from previous months and arrears for terminated employees. This item represents any defined employer contributions (EFB, BB and 180 Benefit Points contributions) outstanding upon the termination of a member’s employment.

The Contributions Due Summary section provides a summary of all the individual contributions listed by member in the preceding Contributions Due section. The adjustments and arrears are combined in a single amount.

4. New and terminated employees list

This section provides a list of new employees or exited employees since the previous Contributions Due Report.

Each new or exited employee appear on the list for one report only, as the list is refreshed each month.

5. Contribution Remittance Advice

The Contribution Remittance Advice is used by the employer to accompany the payment of the contributions for the applicable month. It is a summary of the total amounts due, pre-populated from the contributions due summary.

The Contribution Remittance Advice also allows the employer to add the totals of any contributions not requested via the Contributions Due Report (i.e. member top up contributions or award contributions) or make adjustments to the pre-populated amounts.

Under Superstream, employers are required to pay their employees super contributions and send the associated data electronically. This can be done via SuperChoice ePay.

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The Billing Multiple

As described on page 26 the monthly defined employer contributions to fund the Employer Financed Benefit (EFB) of each member are based on a billing multiple, applied to each member’s superable salary. Additionally, the employer contributions to fund the defined Basic Benefit (BB) for each member are based on a percentage of each member’s superable salary.

Historically, the billing multiple and BB contribution rate (%) were reviewed regularly by the LGS actuary and adjusted, when deemed appropriate. In reviewing whether or not the billing multiple and BB contribution rate were set at appropriate levels, the LGS actuary assessed the adequacy of the pool of funds from which members’ EFB and BB are paid.

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The historical movements in the Billing Multiple, BB rates and 180 Benefit Points rates are shown below:

Date Billing multiple Basic Benefit rate

180 Benefit Points rate

1 Jul 97 to 30 Jun 98 1.9x 2.5% N/A

1 Jul 98 to 30 Jun 99 1.3x 2.7% N/A

1 Jul 99 to 30 Jun 00 1.0x Nil N/A

1 Jul 00 to 31 Oct 00 0.9x Nil N/A

1 Nov 00 to 30 Jun 05 Nil Nil N/A

1 Jul 05 to 30 Jun 08 0.95x 1.25% N/A

1 Jul 08 to 30 Jun 09

<180 Benefit Points

=180 Benefit Points

1.9x

Nil

2.5%

2.5%

N/A

6.5%

1 Jul 09 to 30 Jun 11

<180 Benefit Points

=180 Benefit Points

3.8x

Nil

5.0x

6.9%

N/A

6.5%

I Jul 11 to 30 Jun 13

<180 Benefit Points

=180 Benefit Points

1.9x

Nil

2.5%

2.5%

N/A

6.5%

From 1 Jul 13 to 30 Jun 14

<180 Benefit Points

=180 Benefit Points

1.9x

Nil

2.5%

2.5%

N/A

6.75%

From 1 Jul 14…

<180 Benefit Points

=180 Benefit Points

1.9x

Nil

2.5%

2.5%

N/A

7.00%1

1. The 180 Benefit Points contribution rate will continue to rise in line with future increases to the rate of SG.

As at 1 July 2011, the LGS Trustee decided to return the billing multiple and BB contribution rates back to their original levels with the intention of retaining them at these levels indefinitely.

Each financial year the LGS actuary assesses the adequacy of the pool of funds, together with each employer’s Retirement Scheme liability, and calculates a supplementary contribution amount for the year for each individual employer.

This supplementary amount, known as the Additional Employer Contribution, appears on each employer’s Contributions Due Report, in 12 monthly instalments.

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Government co-contributions

The entitlement of a Retirement Scheme member to Government co-contributions is the same as for an Accumulation Scheme member, as described on page 17.

If LGS receives a co-contribution in respect of a Retirement Scheme member, it is deposited to the member’s OC account.

Non-concessional contributions

For the Retirement Scheme, the following contributions are considered to be non-concessional contributions:

lThe member defined contributions (1% to 9%) when paid from post-tax salary.

lMember top-up contributions to the OC account when paid from post-tax salary.

lSpouse contributions received on behalf of the member to the OC account.

lGovernment co-contributions received on behalf of the member to the OC account; these do not count towards the member’s non-concessional cap.

Any post-tax contributions or spouse contributions for each financial year must be reported to the ATO.

The rules for Retirement Scheme members in respect of the non-concessional cap are exactly the same as those described for the Accumulation Scheme on page 16.

Members who want more information about non-concessional contributions and the non-concessional cap can contact Member Services.

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Concessional contributions

For the Retirement Scheme, the following contributions are considered to be concessional contributions:

lDefined EFB contributions made by an employer

lDefined BB contributions made by an employer

lDefined CFB contributions made by the member on a pre-tax basis only

lTop-up contributions made by the member to the OC account on a pre-tax basis only

lDefined 180 Benefit Points contributions made by the employer to the OC account

lAny other employer contributions such as Award contributions.

For the purpose of reporting concessional contributions to the ATO, the defined EFB and BB contributions are estimated using a formula and form part of the Notional Taxed Contributions (NTC). In respect of each member, the NTC may not match the actual EFB and BB contributions made by the employer during the year.

The general rules for Retirement Scheme members in respect of the concessional contributions cap are the same as those described for the Accumulation Scheme on page 14. However, some extra complexity surrounds the reporting of these contributions to the ATO.

For those concessional contributions made to the accumulation-style components of the Retirement Scheme (i.e. all those specified above, except the defined EFB and BB contributions) reporting the totals at each financial year end is straightforward. However, because the defined EFB and BB contributions made by the employer during the year are not paid directly into each member’s account, the amount to be reported to the ATO must be estimated.

The estimated amount is known as the Notional Taxed Contributions (NTC) and the methodology used to calculate it has been provided by government actuaries.

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Included in the NTC for a member with less than 180 Accrued Benefit Points are:

lDefined EFB contributions made by the employer

lDefined BB contributions made by the employer

lDefined CFB contributions made by a member (pre-tax only).

The defined CFB contributions do not need to be estimated, but they form part of the total NTC, along with the estimated EFB and BB amounts.

For members who have reached 180 Accrued Benefit Points, only the defined BB contributions make up the NTC. The defined CFB contributions and other employer contributions must still be reported to the ATO as concessional contributions.

The administrator calculates the NTC at the end of each financial year, adds the total to any other pre-tax contributions made to the Retirement Scheme for the financial year (to the OC account, for example) and then reports the total to the ATO as that year’s concessional contributions. The ATO then assess the reported amount in respect of that employee’s concessional cap.

In many cases, when the NTC exceeds the cap (i.e. not in conjunction with those concessional contributions that are not considered part of the NTC), there are special provisions in place to protect the member’s NTC against breaching the cap. However, this protection does not apply to all members.

As this is a complex area, members enquiring about concessional contributions, the NTC and whether or not the NTC protection arrangements apply to them, need to contact Member Services.

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Benefit Certificate

The SG legislation does apply to the Retirement Scheme even though it partly consists of defined benefit components and employers do not make regular SG contributions.

It is the responsibility of LGS and not the employer to ensure that a benefit paid to Retirement Scheme members satisfies the minimum benefits guaranteed under SG legislation.

The LGS Trust Deed ensures that the SG obligations for all members are fulfilled. The way in which this is achieved is described in a Benefit Certificate. This certificate is provided by the LGS actuary and is available at lgsuper.com.au/docs

A Retirement Scheme member’s SG entitlements are calculated by reference to the increase in value of their employer funded components for the whole membership period since 30 June 1992. These entitlements are not by reference to the contributions actually paid by the employer for each year in isolation.

When they become payable, if the employer funded components of a Retirement Scheme benefit are found to be of a lower value than the minimum requisite benefit calculated under the Benefit Certificate, an additional amount (i.e. the shortfall) is paid to the member to make up the difference.

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Part-time employeesSalary ratio

The salary ratio forms part of the calculation of a member’s monthly contribution (see page 25). It also influences the ultimate value of a member’s EFB and defined BB.

For full-time employees the salary ratio is always 1.0000. For part-time employees, the salary ratio is less than one.

In order to determine the salary ratio for a part-time member, the administrator requires the following superable salary information from the employer:

lThe actual current part-time Superable Salary

lThe attributed full-time superable salary (i.e. the superable salary that would be paid if the member was working full time).

The salary ratio is calculated as follows:

part-time salary

attributed full-time salary

Example

A member working full-time, with a superable salary of $90,000 reduces his working hours to three days per week and now has a superable salary of $54,000 per annum. His salary ratio is calculated as:

$54,000$90,000

= 0.6000

When applied to his membership the salary ratio will reduce the member’s monthly contribution and benefit points accrual to 0.6 of the full-time rate.

This also impacts an employer’s monthly contributions to the EFB and defined BB.

For as long as a member is providing part time service to an employer and being paid a part-time wage, the superannuation entitlement (funded mainly by the employer) should also be reduced by the same proportion.

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Reporting superable salaries for part-time employees

As the salary ratio directly impacts the contributions made by members and employers, the administrator must be kept up to date with any employees’ changes in hours worked, such as:

lfull-time employees who become part-time

lpart-time employees who commence full-time work

lpart-time employees who increase or reduce their part-time hours.

You should notify the administrator as soon as a change in working hours occurs by completing a Change in Hours Worked (CIHW) form, which is available at lgsuper.com.au/empforms or from Employer Services.

Part-time and full-time equivalent salaries are also requested for part-time employees as part of the annual salary collection process prior to 1 April each year.

Leave Without Pay (LWOP)

There are two types of LWOP in the Retirement Scheme Trust Deed: prescribed and non-prescribed. The Retirement Scheme treats these two types of LWOP very differently from each other, as discussed below.

Prescribed LWOP

The following are considered to be prescribed LWOP:

lSick Leave l Secondment to a non-Scheme employer

lMaternity Leave l Leave to perform union duties

lPaternity Leave l Other circumstances approved by the Trustee

lParental Leave l Military Leave

lWorkers Compensation l Leave to perform duties that are in the interests of the employer or state.

During a period of prescribed LWOP, member and employer contributions continue to be payable as if the employee is still at work. As LGS can’t accept contributions directly from a member, it is recommended, where possible that prior arrangements be made with an employee taking prescribed LWOP, in respect of the employer recovering member contributions from them for the duration of the leave in order to pay the due amounts.

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A period of prescribed LWOP in excess of two years is treated as non-prescribed LWOP.

It is not necessary for the employer to notify LGS of a period of prescribed LWOP.

Non-prescribed LWOP

Any LWOP not considered to be prescribed LWOP is considered to be non-prescribed LWOP.

A period of non-prescribed LWOP is treated very differently to prescribed LWOP in that contributions are not due (the member is unable to make defined contributions) and benefits do not accrue for any whole calendar months during which a member has taken non-prescribed LWOP. However, contributions are payable as normal for the month in which non-prescribed LWOP starts and finishes.

Example 1

A member’s period of non-prescribed LWOP commences on 3 April and ceases on 27 July. Contributions are payable as normal for April and July, as the period of LWOP impacted only on parts of those months. However, no contributions are due for the months of May and June.

The exception to the rules described above occurs where the non-prescribed LWOP commences on the first day of the month, ceases on the last day of the month, or both. In these cases, contributions are not payable for that month (or those months) on the basis that the period of non-prescribed LWOP has impacted upon the whole month.

Example 2

So, if in example 1, the member’s period of non-prescribed LWOP commenced on April 1, contributions are due for April as well as May and June. Additionally, if the non-prescribed period ceased on July 31, contributions would also be due for July.

Please note that defined Basic Benefit entitlements do not accrue in respect of any period of non-prescribed leave which exceeds five days.

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Notifying LGS of a non-prescribed LWOP period

Please notify LGS of any period of non-prescribed LWOP in excess of five days via the ‘Change in Hours Worked’ form. The form is available at lgsuper.com.au/empforms or from Employer Services. The employer is required to confirm the start date and end date (if known) of the non-prescribed LWOP period.

If the end date of the LWOP period is undetermined, the employer needs to advise LGS of the date the employer has returned to work, as soon as possible after it occurs.

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Superable salaries

An employee’s superable salary plays a significant role in the calculation of the member and employer contributions to the Retirement Scheme and in the calculation of the final benefit payable.

Therefore, it is essential that the superable salaries collected from employers are correct and up to date.

Rules 1.2 and 1.4 of Schedule 2 of the LGS Trust Deed deal with the definition of salary for the Retirement Scheme.

Employees under an Award or Industrial agreement

Superable salary includes:

lbase pre-tax salary actually paid to employee, plus

lallowances (including shift allowances) actually paid during the 12 months immediately preceding the 31 December review date and which are taken to be ordinary time earnings (OTE) (refer to page 12 for inclusions in OTE), plus

lthe amount of any weekly workers’ compensation payments which are taken to be ordinary time earnings’ plus

lthe value of private use of an employer-provided vehicle, plus

lthe value of any child care facilities provided by the employer, plus

lsalary sacrifice superannuation contributions paid on behalf of the employee

lthe value of any other salary sacrifice arrangements and any associated fringe benefits tax payable on such other arrangements.

Particular care needs to be taken in calculating any allowances and shift loadings that are included in the salaries reported.

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Contract employees (including Award regulated contracts)

Contract employees are taken to be all employees (other than executive officers) who are employed on an individual contract basis, including an individual on an award regulated contract.

Superable salary is the value of the employee’s total salary package less:

lthe Assessed Annual Cost (AAC) cost to the employer of providing Retirement Scheme benefits as determined by the Trustee.

Please note that the AAC to the employer of providing Retirement Scheme benefits may bear no apparent resemblance to the contributions actually paid by the employer at any given time. The AAC is calculated as follows:

Average contribution rate x 1.9 + 2.5% of superable salary

Once the initial salary is nominated, any increase in salary cannot be greater than the percentage by which the total salary package has increased since the salary was last nominated or changed. This means that a member’s salary can only increase if the total value of the remuneration package has also increased.

Salary reductions

When a member has a reduction in salary, contributions continue to be payable on the unreduced salary up until the following 31 March, unless the Trustee approves a reduction in the contributions payable. These members should contact Member Services.

Special provisions apply where the reduction in salary is 20% or more. Under these circumstances, the member concerned has the option of crystallising their accrued entitlement in the form of a deferred benefit and then either rejoining the Retirement Scheme as a new member or joining the Accumulation Scheme. Members wanting to take up this option need to lodge an election with LGS.

Special provisions also apply to members who have had a salary reduction due to ill-health or other exceptional circumstances. These members may apply to Member Services to have their pre-reduction superable salary applied up until such time as their actual salaries exceed the pre-reduction salaries. Members wanting to use these provisions need to apply to LGS.

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Annual Reporting of salaries

In December each year, LGS provides each employer with an electronic listing via e-mail of members employed by that employer.

The employer is required to provide LGS with the following details for those members:

Full-time members

lNew full-time salary paid as at 31 December.

Part-time members

lFull-time equivalent salary as at 31 December, pluslPart-time salary paid as at 31 December,

or

lNew salary ratio (if applicable).

Reporting of salaries on exit

Employers are required to advise LGS of the superable salary as an annual amount for an exiting member as at the last day of service with the employer. This information is needed as soon as possible as it reduced the risk of any delay in removing the member from the Contributions Due Report. It also assists in the processing of any benefit payable to the member.

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Retrospective salary adjustments

The superable salary to be reported for contribution purposes is the salary actually in payment at 31 December. Retrospective adjustments to pay (such as back dated pay increases) should not be reported for contribution purposes. Any corrections to errors in the original salary reporting can be amended, so these should be reported to LGS as soon as they are detected.

In the case of members who are ceasing employment, retrospective salary adjustments may be used to calculate their final benefits. Therefore retrospective adjustments are captured via the Employment Termination Advice (ETA) which asks for the salary at exit and the previous two review days (i.e. the last 31 December and the 31 December before that). This enables LGS to correctly determine the benefit entitlements of members whose benefits are based on final average salary.

Members transferring between employers

Members of the Retirement Scheme who transfer their employment to another LGS employer may have the option of transferring their contributory membership to their new employer, rather than exiting the Retirement Scheme. This is referred to as continuity of membership.

Continuity of membership within the Retirement Scheme can occur when a member has ceased employment and is entitled to apply for a benefit on the grounds of Partial and Permanent Invalidity (PPI), Resignation/Dismissal/Discharge or Retrenchment.

Continuity of membership is also available to members who have reached their early retirement age (which is 58 in most cases, but may be 55 if this has been carried over from membership of one of the predecessor schemes listed on page 22-23).

When a member has commenced employment with another LGS employer (or recommenced with the same employer) the following criteria must be met:

lThe new period of employment has commenced no later than three whole calendar months following the month in which the original employment ceased.

lThe member has not been paid a benefit or any part of a benefit following the original termination of employment.

lThe member has made the application for continuity of membership to LGS within two months of commencing employment with the new employer.

lThe LGS Trustee has granted approval for the continuity of membership to occur.

If the member has changed LGS employers, but is not eligible to apply for continuity or chooses not to apply for continuity, they may elect to defer their Retirement Scheme benefit or receive a benefit payment (subject to Retirement Scheme and Preservation rules). Upon commencement with the new LGS employer an Accumulation Scheme account is opened for the member in order to receive employer contributions (including SG contributions) and any personal contributions.

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In some cases it is possible to transfer Retirement Scheme membership if a member has moved to or from an EISS employer or a participating SASS employer. When a former LGS member is seeking continuity to the EISS Retirement Scheme or SASS, this would be subject to the rules of that scheme and the approval of the relevant trustee is required.

New or terminating employees who may want to use these provisions can contact Member Services for further information and/or an application form.

Ceasing employment

In all cases when a Retirement Scheme member has ceased employment, certain information is required from the employer via the Employment Termination Advice form.

Employers should ensure that the Employment Termination Advice form is completed and sent to the administrator as soon as possible. Additionally, any outstanding contributions should also be remitted as soon as possible so LGS can calculate and, when requested, pay the final benefit with minimal delay.

The LGS Employment Termination Advice form can be found at lgsuper.com.au/empforms

When a member has ceased employment due to invalidity, the employer is required to complete the ‘Employer Statement’, which forms part of the member’s invalidity application pack.

For further information contact your LGS client relationship manager or Member Services.

Important note: Until LGS receives confirmation that a member has ceased employment, member and employer contributions will continue to be confirmed as due on the monthly statement.

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Executive officers

Retirement Scheme members who are considered to be executive officers have the option of transferring their LGS membership to the Accumulation Scheme. Upon doing so, they can leave their accrued entitlements in the Retirement Scheme as a deferred benefit or have the Retirement Scheme benefit calculated and transferred to the Accumulation Scheme as a lump sum.

More information on the eligibility criteria for a transfer to the Accumulation Scheme as an executive officer can be found in the Executive Scheme section on page 21.

Alternatively, employees who want further information about transferring to the Accumulation Scheme as an Executive Officer can contact Member Services.

Members’ entitlements

The main features of the Retirement Scheme are provided in the PDS available at lgsuper.com.au/PDS

Employers who are asked about member’s entitlements and options can refer members to the website or to Member Services, but should not offer any specific information relating to benefits. No assurances should be given to exiting members that they will recieve a particular benefit.

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Membership

Members of the LGS Defined Benefit Scheme were originally members of the State Superannuation Scheme (SSS) and were either compulsorily transferred to LGS on 1 July 1997 or have subsequently transferred their membership from SSS after becoming employed by an LGS employer.

Defined Benefit Scheme Rules make no distinction between casual and permanent employees. It is quite possible for a casual employee to continue membership in this Division under some circumstances.

A casual employee wanting to continue their Defined Benefit Scheme can contact Employer Services for clarification on whether or not this is possible.

Defined member contributions

Each year, members elect (or are required) to contribute for a specified number of units of pension. Members’ individual unit entitlements are based on their superable salaries at each Annual Review Day (ARD).

The adjustments to members’ unit entitlements take effect on the Annual Adjustment Day (AAD). The ARD and AAD will vary depending on the member’s month of birth as shown below:

Month of Birth Annual Review Day Annual Adjustment Day

January to June 28 July 21 October

July to December 9 February 5 May

Prior to each AAD, employers are notified of the new four-weekly contributions payable by each member; there are 13 contribution periods in each financial year. It is the responsibility of the employer to:

ldeduct these contributions from their employees’ salaries

lforward the amounts deducted to the administrator by no later than the 28th day of the following month.

Subject to employer conditions, members may meet their contribution obligations by:

lconcessional (pre-tax) contributions only, grossed up to allow for the 15% contributions tax (or 30% tax for some or all of the contributions for any employees earning $300,000 or more per annum), or

lnon-concessional (post-tax) contributions only, or

la combination of concessional and non-concessional contributions.

Refer to page 6 for more information about remitting contributions.

Defined Benefit Scheme

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The contributions periods are shown in the table below:

Period No From To

1 1 July 28 July

2 29 July 25 August

3 26 August 22 September

4 23 September 20 October

5 21 October 17 November

6 18 November 15 December

7 16 December 12 January

8 13 January 9 February

9 10 February 9 March

10 10 March 6 April

11 7 April 4 May

12 5 May 1 June

13 2 June 30 June

Additional member contributions

Members may make contributions to the Defined Benefit Scheme over and above their defined contributions towards their individual unit entitlements.

However, these additional contributions do not count towards the defined benefits provided by the Defined Benefit Scheme. Instead, they are invested in the member’s Other Contributions (OC) account.

Employer contributions

Under the LGS Trust Deed, the employer is required to make certain contributions to the Defined Benefit Scheme on a four-weekly basis:

lDefined contributions to fund the employer financed benefit.

lContributions to fund the defined Basic Benefit (BB).

lAn Additional Employer Contribution (where required) to supplement the defined contributions towards the employer financed benefit.

Any Additional Employer Contribution for the Defined Benefit Scheme is included in the amount listed on the Retirement Scheme monthly Contributions Due Report. It is not listed as a separate amount.

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Contributions to fund the employer financed benefit

The four-weekly contribution to fund the employer financed benefit and BB of each Defined Benefit Scheme member is based on a billing multiple and BB contribution rate, applied against the member’s own four-weekly contribution.

The Defined Benefit Scheme billing multiple is determined separately by the LGS actuary and often differs to the billing multiple for the Retirement Scheme.

The historical movements in the Defined Benefit Scheme billing multiple and BB contribution rate are shown below:

Date Billing multiple Basic Benefit rate

1 Jul 1997 to 30 Jun 1998 1.64x 2.5%

1 Jul 1998 to 30 Jun 1999 1.1x 2.7%

1 Jul 1999 to 30 Jun 2000 1.0x Nil

1 Jul 2000 to 31 Oct 2000 0.9x Nil

1 Nov 2000 to 30 Jun 2005 Nil Nil

1 Jul 2005 to 30 Jun 2008 0.82x 1.25%

1 Jul 2008 to 30 Jun 2009 1.64x 2.5%

1 Jul 2009 to 30 Jun 2011 3.28x 5.0%

I Jul 2011 onwards 1.64x 2.5%

Government co-contributions

The entitlement of a Defined Benefit Scheme member to the Government co-contribution is the same as for an Accumulation Scheme member, (please see page 17).

If LGS receives a co-contribution for a Defined Benefit Scheme member, it is deposited to the member’s OC account.

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Non-concessional contributions

For the Defined Benefit Scheme, the following contribution types are considered to be non-concessional contributions:

lDefined contributions made by the member towards units (if paid from post-tax salary).

lMember top-up contributions to the OC account (if paid from post-tax salary).

lSpouse contributions received on behalf of the member to the OC account.

lGovernment co-contributions received on behalf of the member to the OC account. These do not count towards the member’s non-concessional cap.

The rules for Defined Benefit Scheme members for the non-concessional cap are the same as those described for the Accumulation Scheme on page 16.

Members who want further infomration about non-concessional contributions and the non-concessional cap can contact Member Services.

Concessional contributions

For the Defined Benefit Scheme, the following contributions are considered to be concessional contributions:

lDefined employer contributions

lDefined BB contributions, made by an employer

lDefined contributions made by the member towards units (if paid on a pre-tax basis)

lAny other employer contributions (such as Award contributions)

lAny member ‘top up’ contributions made by the member on a pre-tax basis only.

For the purpose of reporting concessional contributions to the ATO, the defined employer and BB contributions are estimated using a formula and form part of the Notional Taxed Contributions (NTC).

The general rules for Defined Benefit Scheme members in respect of the concessional contributions cap are the same as those described for the Accumulation Scheme on page 14. However, as with the Retirement Scheme, some additional complexity exists in the reporting of concessional contributions to the ATO.

Like the Retirement Scheme, the Defined Benefit Scheme utilises actuarial formulae to estimate the concessional contributions to be reported to the ATO in respect of each financial year. Because this is an estimate, it should be noted that a member’s NTC may not match the actual contributions made by the employer for that member during the year.

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Included in the NTC for Defined Benefit Scheme members are:

lDefined employer contributions

lDefined BB contributions made by an employer

lDefined contributions made by the member towards units (if paid on a pre-tax basis).

The defined member contributions do not need to be estimated, but they form part of the NTC along with the estimated employer amounts.

The administrator must calculate the NTC at the end of each financial year, add the total NTC to any concessional contributions made to the Defined Benefit Scheme during the financial year (e.g. to the OC account) and report the total concessional contributions to the ATO.

In all cases when the NTC exceeds the concessional cap (i.e. not in conjunction with any other non-NTC concessional contributions), there are special provisions that allow LGS to protect the member’s NTC against breaching the cap.

Please refer members enquiring about concessional contributions, the NTC and/or the concessional cap to contact Member Services.

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Superable salaries

Members’ unit entitlements are calculated on the basis of the salaries advised by the employer. It is therefore important that the reported salaries are correct.

The Rules concerning the calculation of superable salary are found in Schedule 4 of the Trust Deed, (Rules 1.2 and 1.3), available at lgsuper.com.au. The following is a summary of those rules.

Award or wages employees

Superable salary includes:

lthe base pre-tax salary actually paid to employee, plus

lallowances (including shift allowances) actually paid during the 12 months immediately preceding the members annual review date and which are taken to be Ordinary Time Earnings (OTE), plus

lthe amount of any weekly workers’ compensation payments which are taken to be OTE, plus

lthe value of private use of an employer-provided vehicle, plus

lthe value of any child care facilities provided by the employer, plus

lvoluntary salary sacrifice (concessional) superannuation contributions paid on behalf of the employee

lthe value of any other salary sacrifice arrangements and any associated fringe benefits tax payable.

Employer services can assist employers in calculating the allowances and shift loadings that are included in the salaries reported.

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Contract employees (including award regulated contracts)

Contract employees are all employees who are employed on an individual contract basis, including an individual on an award regulated contract.

More information can be found in the document ‘Superannuation “Costs” for Packaged/Contract Staff in the Defined Benefit Scheme’, available in the Employer section at lgsuper.com.au

Salary reductions

When a member has a reduction in salary, contributions continue to be payable on the units for which contributions were already being paid, unless the LGS Trustee approves a reduction in the contributions payable. The employer must notify LGS of the reduction immediately. The excess units do not, however, attract any benefits until such time as the member’s unit entitlement increases with salary increases to the same level or higher than the pre-reduced salary.

Special provisions apply where the reduction in salary is 20% or more. Under these circumstances the member has the option of crystallising their accrued entitlement in the form of a deferred benefit and then either joining the LGS Retirement Scheme as a new member or joining the LGS Accumulation Scheme.

Special provisions also apply to members who have had a salary reduction due to ill-health, or other exceptional circumstances. These members can apply to LGS to have their pre-reduction unit entitlement (and hence benefits) continue to apply up until such time as their actual salaries exceed the pre-reduction salaries.

Please refer members who are subject to a salary reduction to contact Member Services about their options.

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Annual reporting of salaries

For each Annual Review Day, LGS provides each employer with a list of members employed by them whose salaries are to be reviewed. The employer needs to check this list against their own records and provide LGS with the following details for each of their current members:

lMembership number

lName

lActual salary paid as at the Annual Review Day

lEquivalent full-time salary for part-time employees as at the Annual Review Day.

Please provide these details to LGS no later than two weeks following the Annual Review Day.

Benefit Certificate

As with the Retirement Scheme, LGS holds a Benefit Certificate for the Defined Benefit Scheme which states that LGS will ensure it complies with its SG obligations.

Refer to page 35 for further information about the Benefit Certificate.

Members transferring between employers

Members of the Defined Benefit Scheme who transfer employment to another LGS employer may transfer their contributory membership to the new employer under the continuity provisions described for the Retirement Scheme on page 43.

Additionally, the same mobility provisions also apply for former members of the EISS Defined Benefit Scheme and SSS who join an LGS employer. These provisions are also discussed on page 43.

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Executive officers

Defined Benefit Scheme members who are considered to be executive officers have the option of transferring their LGS membership to the Accumulation Scheme. Upon doing so, they can leave their accrued entitlements in the Defined Benefit Scheme as a deferred benefit or arrange to have the deferred benefit transferred to the Accumulation Scheme as a lump sum.

More information on the eligibility criteria for a transfer to the Accumulation Scheme as an executive officer can be found in the Executive Scheme section on page 21.

Alternatively, members who want further information about a transfer to the Accumulation Scheme as an executive officer can contact Member Services.

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Leave Without Pay (LWOP)

There are two classes of LWOP: prescribed (approved) and non-prescribed (non-approved). The Defined Benefit Scheme treats these two types of LWOP differently. The prescribed LWOP counts as service for Defined Benefit Scheme purposes, whereas non-prescribed LWOP may not.

Prescribed or approved LWOP

The major types of prescribed LWOP are maternity/paternity leave and sick leave without pay. Other classes of prescribed LWOP are listed at Rule 11.8.4 of Schedule 4 to the Trust Deed, which can be accessed on lgsuper.com.au

Member contributions continue to be payable while a member is on prescribed LWOP at the same rate as would apply had the member not been on LWOP. This can lead to difficulties unless arrangements are made regarding the payment of those contributions prior to commencing leave.

Employees commencing LWOP should contact Member Services beforehand to make the necessary arrangements—with one of the options available being deferral of payment until returning from leave.

Employers should note that employer contributions (when applicable) continue to be payable while a member is on prescribed LWOP.

A period of prescribed LWOP that exceeds two years duration is treated as non-prescribed LWOP from the end of that two year period. See the non-prescribed conditions below.

Non-prescribed or non-approved LWOP

This includes any LWOP that is not prescribed or authorised LWOP. Defined Benefit Scheme entitlements are adjusted in respect of periods of non-prescribed LWOP that extend beyond three months unless the member makes prior arrangements with the employer regarding the payment of the employer contributions during that period. The employer should advise the Scheme administrator whether or not such arrangements have been made prior to the member commencing leave.

Member contributions continue to be payable, although when no arrangement is made with the member to pay the employer contributions during the period of LWOP, there might be a reduction in the member’s unit entitlement and contribution rate.

Members’ entitlements to the Basic Benefit (the separate 3% employer funded benefit) do not accrue in respect of any period of non-prescribed leave that exceeds five days. Employers are therefore required to report all periods of non-prescribed LWOP exceeding five days, irrespective of whether or not that period extends over three months.

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The following table summarises the differences between approved and non-approved leave:

Approved LWOP Non-approved LWOP

Types of leave

Sick leave without pay, maternity leave without pay, secondment, workers compensation, duties for the employer or State, military leave, circumstances approved by the Trustee.

Holiday or annual leave.

Is employer advice required?

No–unless sick leave or maternity/paternity leave without pay exceeds two years.

Yes–for LWOP in excess of five days and for part-time LWOP.

Are contributions payable?

Yes–employee and employer contributions are payable. However, for sick or maternity leave, contributions are due for the first two years only.

Employee and employer contributions remain payable for the whole period.

Is there a permanent reduction in unit entitlement?

No.

Yes. The employer may require the employee to pay the employer’s contributions liability for the whole period of the leave (generally when the leave exceeds three months). If the employee is unable to pay the employer’s liability, the employee may take a permanent reduction in unit entitlement. The employee should contact Member Services.

Can employee contributions be deferred?

Yes, subject to the Trustee’s approval.

Yes, subject to the Trustee’s approval.

Basic Benefit

The Basic Benefit accrues for the first two years only for maternity and sick LWOP.

The Basic Benefit does not accrue for any period in excess of five days.

Part-time employees

Defined Benefit Scheme contributions and benefits are both calculated with reference to a member’s salary ratio, i.e. the actual salary received divided by the salary payable if the member was working full-time.

For example, a member working three days per week would receive 60% of the salary payable to a full-time employee and the member’s salary ratio would be 0.6.

The member’s unit entitlement is adjusted in respect of the period the member is employed on a part-time basis. Employees considering a change in working hours should contact Member Services beforehand to determine the impact on their entitlements.

A failure to immediately report changes in working hours will result in either:

lan accrual of contribution arrears – when there is an increase in working hours, or

l an over-calculation of both contributions payable and benefits payable – when there is a decrease in working hours.

Tax File Numbers

LGS is required to ask all new members to provide their Tax File Numbers (TFNs). Although it is not compulsory to do so, a member may be disadvantaged if they choose not to supply their TFN by paying more tax than would otherwise be required. Furthermore, LGS can’t accept any non-concessional contributions for a member if a TFN hasn’t been provided.

Employers are required to provide the TFN of all new members to LGS within 14 days of receiving their TFN declaration form.

TFNs also assist members in locating their superannuation benefits if they have lost contact with their superannuation fund and also assist multiple accounts to be identified and amalgamated if required.

Members at any stage of membership can provide their TFN by completing the Notification of Tax File Number (TFN) form available at lgsuper.com.au

Employer contact information

Employer Services 1800 636 441 employeronline@lgsuper.com.au (for contribution files) employerservices@lgsuper.com.au (for other enquiries)

Client Relationship Managers

Client Relationship Managers (CRMs) provide both employers and employees with direct information services. Employers are encouraged to seek their assistance with any problems that they or their employees might have.

Please visit lgsuper.com.au/CRM for the contact details of your CRM.

General contact information

Local Government Super

PO Box N835 Grosvenor Place Sydney NSW 1220

Member Services 1300 LGSUPER (1300 547 873)

Web lgsuper.com.au

Sydney Level 12, 28 Margaret St

Newcastle Ground Floor, 12 Perkins St

Wollongong Shop 2/60 Burelli St

Office hours 8.30am–5.00pm, Monday–Friday

Offices in Orange, Parramatta, Tamworth and Wagga Wagga are available on an appointment only basis.

Bookings are essential. Phone 1300 LGSUPER (1300 547 873) to make an appointment.

Contact details

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