House of Assembly Fifty-First Parliament, Second Session (51-2) 51 2 Parliament of South Australia House of Assembly published Bills Local Government (Superannuation Scheme) Amendment Bill LOCAL GOVERNMENT (SUPERANNUATION SCHEME) AMENDMENT BILL Introduction and First Reading Introduction and First Reading The Hon. K.O. FOLEY House of Assembly Port Adelaide Deputy Premier Minister for Industry and Trade Minister for Federal/State Relations The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (16:21): Obtained leave and introduced a bill for an act to amend the Local Government Act 1999. Read a first time. Second Reading Second Reading The Hon. K.O. FOLEY House of Assembly Port Adelaide Deputy Premier Minister for Industry and Trade Minister for Federal/State Relations The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (16:21): I move: That this bill be now read a second time. I seek leave to have the second reading explanation inserted in Hansard without my reading it. Leave granted. This Bill seeks to make amendments to the Local Government Act 1999, for the purpose of enabling a restructuring of the Local Government Superannuation Scheme. At the present time, the Local Government Superannuation Scheme is established under the Local Government Act, with the rules being prescribed in regulations. The Local Government Act currently contains reasonably extensive provisions dealing with governance issues relating to the scheme. The scheme is administered by the Local Government Superannuation Board, which conducts its business under the name of Local Super (SA NT). Whilst the scheme is established under the Local Government Act, and the legislation currently provides a number of links with the State Government (for example, the scheme's accounts are subject to audit by the Auditor General; the Minister nominates two persons to the Board; and annual reports and actuarial reports are to be tabled in the Parliament), the scheme operates essentially like a private sector scheme and the State Government has no financial responsibility for the scheme. In 1994, the Local Government Superannuation Board elected to become a Commonwealth regulated fund, and as a result the scheme is subject to regulation under the Superannuation Industry (Supervision) Act 1993 of the Commonwealth. As background, the scheme has around 20,700 members and the number of members continues to grow. 'The scheme' is actually made up of several schemes, both defined benefit and accumulation in style, with all schemes being fully funded. The scheme has 172 active participating employers that include the 68 South Australian councils, as well as numerous other employers that have been declared by the superannuation scheme to be an authority or body to which the scheme applies. Of these other entities, 20 are Northern Territory councils and 84 are other non council employers. A significant number of the non council employers are private hospitals. As Local Super already provides superannuation services to a significant number of employees who do not work in Local Government, and in an environment where a large portion of the workforce can now choose the superannuation scheme into which their employer financed contribution is directed, the Local Government Superannuation Board has approached the Government seeking amendments to the Local Government Act so that the scheme can operate under a governance arrangement more akin to a private sector scheme. Most schemes operating in the superannuation industry operate in terms of a Trust Deed, and the legislation contained in this Bill provides for the existing scheme to be continued but subject to a Trust Deed. As part of the restructure provided for in this Bill, the terms, conditions, and benefit structure of the scheme immediately before the amendments to the Local Government Act 1999 take effect are to be replicated in the Trust Deed. In other words, there will be no change in the schemes, or in the entitlements of members, when the scheme is established under a Trust Deed. From a member perspective, there will be a "seamless transfer" to the new governance arrangements. In order to comply with the requirements of the Superannuation Industry (Supervision) Act 1993 (Commonwealth), the trustee will be a constitutional corporation, and the legislation provides for the directors of the company that will act as trustee of the fund to be the same persons holding positions on the Local Government Superannuation Board at the date the restructure comes into operation. As the Board will be responsible for establishing the company to perform the duties of trustee of the scheme, as well as preparing the Trust Deed in accordance with requirements of this legislation and to the satisfaction of the Treasurer, it is envisaged that the Board will reflect the existing representation on the Board in the company director structure. The plan of the Local Government Superannuation Board is for the scheme to also become a 'public offer fund' three years after the governance restructure in the Bill comes into operation. As a public offer fund, Local Super will be able to provide its services to any employee and employer. One of the other benefits of being a 'public offer fund' will be that employees who resign from council employment will be more attracted to leave their accrued benefit with Local Super and request their new employer to direct future superannuation contributions back to Local Super as their scheme of choice. As a trade off for becoming a public offer fund, the Local Government Superannuation Board has acknowledged that it will need to forgo the benefit of the existing mandatory requirement for South Australian councils to direct all their new employees into the scheme. In other words, it is proposed that in three years time, Local Super will operate in the Commonwealth's full choice of fund regime, and all new council employees will be able to select the superannuation scheme of their choice. One of the other consequences of moving out into the private sector and competing for new members, is that Local Super also accepts that it will need to allow existing members of the scheme, as an option, to request their employer to direct future employer financed contributions to an alternative fund of their choice. The Local Government Act, as amended by the Bill, will continue to refer in Part 2 of Schedule 1 to the continued existence of the Local Government Superannuation Scheme. This will enable the existing exemption from the Commonwealth's choice of fund arrangements to continue. Regulations under the Superannuation Guarantee (Administration) Act 1992 (Commonwealth) prescribe members of a scheme established under the Local Government Act as being exempt from the Commonwealth choice of fund arrangements. It is the intention to have this provision expire on the making of a proclamation three years after the restructuring facilitated by the Bill comes into operation, to enable the choice of fund arrangements to come into operation for new local government employees and members of the Local Super accumulation schemes. The Local Government Superannuation Board and the Local Government Association support the proposal contained in this Bill. I commend the Bill to Members. Explanation of Clauses Explanation of Clauses Part 1—Preliminary 1—Short title This clause is formal. 2—Commencement Operation of the Act is to commence on the day on which it is assented to by the Governor. However, section 4 is to come into operation on a day to be fixed by proclamation. 3—Amendment provisions This clause is formal. Part 2—Amendment of Local Government Act 1999 4—Amendment of Schedule 1—Provisions relating to organisations that provide services to the local government sector This clause deletes Part 2 of Schedule 1 of the Local Government Act 1999 and substitutes a new Part. Part 2 currently contains provisions relating to the Local Government Superannuation Scheme, including provisions dealing with such matters as the continuation of the Local Government Superannuation Board (the Board), investment of funds, auditing of accounts and reporting requirements. Those provisions are to be deleted and a new clause substituted in their place. New clause 3(1) provides that the Local Government Superannuation Scheme continues in existence. This subclause applies subject to the operation of Schedule 1 of the Local Government (Superannuation Scheme) Amendment Act 2008, which provides for the continuation of the scheme under a trust deed. The Local Government Act 1999 and the Local Government (Superannuation Scheme) Amendment Act 2008 are to be read together as if they form a single Act. A contribution by an employer for the benefit of an employee who is a member of the Local Government Superannuation Scheme will therefore be a contribution under the Local Government Act 1999. The new Part is to expire on a day to be fixed by proclamation. Schedule 1—Transitional provisions 1—Interpretation This clause provides definitions for a number of terms used in the Schedule of transitional provisions. The new scheme is the Local Government Superannuation Scheme continued in existence under a trust deed as required under the Schedule. The old scheme is the Local Government Superannuation Scheme under the Local Government Act 1999 before the day on which section 4 comes into operation (that is, the day on which Schedule 1 Part 2 is repealed and replaced by a new Part). 2—Continuation of Local Government Superannuation Scheme This clause provides for the continuation of the Local Government Superannuation Scheme under a trust deed. A council or other authority or body that is a participating employer under the old scheme immediately before the day on which the amendment to Schedule 1 of the Local Government Act 1999 made by section 4 comes into operation (the relevant day) is to be a participating employer in the new scheme and will also be taken to be a signatory to the trust deed. Councils and other relevant authorities or bodies are required under subclause (3) to continue to be participating employers for at least three years after the trust deed commences. 3—Making and commencement of trust deed The Board is required under this clause to prepare the trust deed, which is to commence on a day specified by the Treasurer by notice in the Gazette. The notice may not be issued until the Treasurer is satisfied that a company has been established for the purpose of administering the scheme (as required under clause 4) and that the trust deed prepared by the Board meets certain requirements specified in clause 5. 4—Establishment of company The Board is required under this clause to establish a company to administer the scheme in accordance with the trust deed. The members of the Board on its dissolution are to be members of the board of directors of the company on the day on which the amendment to Schedule 1 of the Local Government Act 1999 made by section 4 comes into operation. Any legal obligation of the Board at the time of its dissolution will become a legal obligation of the company, unless the obligation is excluded by the Treasurer. 5—Requirements for new scheme and trust deed The terms, conditions, benefit structure and membership of the old scheme are to continue under the new scheme unless varied in accordance with the terms of the trust deed. The company established under clause 4 will be the trustee for the new scheme and is to continue to hold office as trustee unless and until another company is appointed to the role of trustee in accordance with the trust deed. 6—Dissolution of Local Government Superannuation Board The Local Government Superannuation Board will be dissolved when section 4 comes into operation, that is, when the existing provisions of Schedule 1 Part 2 of the Local Government Act 1999 are replaced with a new Part. The new Part continues the superannuation scheme subject to the operation of Schedule 1 of the Local Government (Superannuation Scheme) Amendment Act 2008, which continues the scheme under a trust deed. 7—Transfer of assets and liabilities When the trust deed commences, the assets and liabilities of the old scheme will be transferred to the company for the purposes of the new scheme. 8—Stamp duty Stamp duty will not be payable in respect of a transfer of assets or liabilities arising out of the operation of these transitional provisions. 9—Revocation of regulations Any regulations made under Schedule 1 Part 2 of the Local Government Act 1999 are to be revoked. 10—Saving provision This clause makes it clear that nothing done under the transitional provisions will— constitute a breach of, or default under, an Act or other law; or constitute a breach of, or default under, a contract, agreement, understanding or undertaking; or constitute a breach of a duty of confidence; or constitute a civil or criminal wrong; or terminate an agreement or obligation or fulfil a condition that allows a person to terminate an agreement or obligation, or give rise to any other right or remedy; or release a surety or other obligee wholly or in part from an obligation. 11—Application of Schedule This clause expresses the intention of Parliament that the Schedule comprising the transitional provisions apply within the State and outside the State to the full extent of the extra territorial legislative capacity of the Parliament. 12—Other provisions This clause authorises the making of regulations of a saving or transitional nature consequent on the enactment of the Act. Debate adjourned on motion of Mr Venning.