The following post originally issued following announcement of some time-critical amendments under the Modern Awards legislation. It was published to help employer clients understand their obligations under default fund-superannuation choice provisions of the legislation. The particular obligation here, is the provision of a default fund for superannuation choice. It is occasionally refreshed to reflect current regulations and trends.
How Modern Awards impact the way default funds or super choice obligations are met
The default fund for your employees was, and continues to be, an important provision in compliance with superannuation guarantee obligations. In the Modern Awards regulatory environment (since January 2010), the default fund significantly reduced your administrative processes. It was an important advantage for your employees in the unfolding circumstances.
A default fund is the ‘employer choice’ fund that satisfies their obligations under the Choice of Super rules. If an employee fails to advise any alternative account, this is the fund into which their contributions are automatically paid. The time-relevant default fund facilitates compliance with the superannuation guarantee obligations as an employer.
Benefits available under an employer-chosen default fund –
For employer clients at that time, the fund was an Asgard Employee Superannuation Account. Under this and similar default fund offerings, employees benefit from a range of options, including –
- reduced fees within their accounts subject to their individual account balance – and
- further discounts based on:
- a) the number of members in the default fund; and
- b) the total value of the member account balances.
The downside of these group account structures was that –
- as members exercise their ‘choice’ to move to a different provider, not only do
- they remove themselves from the discount mechanism – but they also
- expose their fellow members to a reduced discount eligibility (depending on the residual membership data).
In our employer client situations, their default funds were established prior to 12 September 2008. As referenced in our article ‘Superannuation Guarantee Obligations Critical Dates‘, this was a critical date for compliance. New employees could be accommodated within the existing default fund in spite of any Modern Awards specification. They retained however, the right to elect under Choice of Super provisions, to make a different selection.
Reviewing default fund structures and offerings to employees –
A further consideration when reviewing the default fund compliance was/ is the insurance protection offered to employees. The greater the number of members, the more generous the ‘Automatic Acceptance Limits’ applicable. A significant advantage that can be quite helpful to members who have had difficulty obtaining adequate cover outside of their superannuation account. Using this benefit, they are able to take up insurance cover without having to undergo medical reporting or underwriting generally.
If you would like to make an appointment with one of the experienced advisers on the Continuum Financial Planners team, to
review the insurance benefits offered within your employer default fund, please –
- phone our office, on 07-3421 3456, or
- at your convenience, use the linked Book A Meeting facility.
(This article was originally posted by us in February 2008. We occasionally refresh/ update it, most recently in March 2025.)
