Welcome

In this edition of the Employer Newsletter, we provide details about the LGS Employer Forum which is to be held in March 2010. There is also an article on how Choice operates for employers since councils were returned to NSW State industrial relations jurisdiction in 2008 as well as some reminders about the calculation of superable salary for contract staff and the Retirement and Defined Benefit Scheme billing rates for 2010/11.

In addition, we introduce you to Ian Hamilton and the rest of the team at our Wagga Wagga office and provide you with several administration updates and reminders. And, as usual, we update you on LGS's investment performance and our forthcoming seminar schedule.

We value your feedback, so please feel free to send us your comments or any suggestions on what articles you'd like to see in future newsletters by emailing: employerservices@lgsuper.com.au.

Change re choice of funds

Arising from the former federal government's WorkChoices legislation in 2006, NSW councils that were constitutional corporations became covered by the federal industrial relations jurisdiction and were obliged to offer choice of funds to employees from 1 July 2006.

With the de-corporatisation of NSW local government in late 2008, however, you may not be aware that councils now come under the NSW State industrial relations jurisdiction, and so are not obliged to offer choice of fund to employees if their compulsory employer superannuation contributions are made under, or in accordance with, a State industrial award.

Clause 12 of the Local Government (State) Award 2007 and clause 38 of the Local Government (Electricians) State Award provide that councils must pay super to the Local Government Superannuation Scheme. What this means in essence is that in respect of employees covered by the Local Government (State) Award 2007 and the Local Government (Electricians) State Award, councils are not obliged to offer employees the opportunity to invest their super elsewhere. That said, councils can still establish an agreement with another super fund but there is no longer any obligation to do so.

Please note that there are some exceptions and you should seek advice from the LGSA if you are unsure of your situation. For example, the choice of funds requirement still applies to designated senior staff not covered by a State award. The LGSA has their own Industrial Relations team who may be contacted on (02) 9242-4142 to assist with any queries.

When staff join or leave

As you may already know, the Accumulation division of Local Government Super has established a public offer division, effectively offering the opportunity for 'lifetime' membership.

This lifetime membership capability simply means that if an employee leaves your employment, they can:

• Remain a member of LGS
• Nominate to have their new employer contribute into their LGS account.
• Continue to make personal contributions
• Rollover money from other complying superannuation funds into their account.

Staying with LGS will mean that members can have their super consolidated in one account and continue to receive all the benefits they currently enjoy, such as cost-effective fees and charges, financial planning advice and insurance cover (if they held it at the time of leaving employment).

Departing employees

It's important, therefore, that employees within the Accumulation Scheme who leave your employment understand this opportunity and we ask for your assistance with this.

Please remember to provide departing employees with copies of the Leaving your employer? brochures. It enables an exiting employee to ask us for assistance when considering what to do with their super and includes a Choice form.

New starters

Also, don't forget to issue new employees with Choice kits which include a Choice brochure, Choice form and a few promotional items.

Please contact your Client Relationship Manager if your stock of these brochures or kits is running low, or if you have any questions about the new public offer division and how you can assist employees with their lifetime membership. Otherwise, call 1300 369 901 and ask the Member Services team to help with getting this material.

Handling member forms

LGS members may sometimes hand in Local Government Super forms (such as Membership Application and Investment Strategy Switch forms) to you, the employer, for you to forward them to us. If this happens you should remember that some forms can have an immediate impact on member entitlements, such as those relating to how their money is invested, and any delay in sending them to us could lead to a complaint on the part of the employee.

You can ask staff to send any member forms directly to LGS which absolves you of any responsibility in this area. However if you are willing to send LGS member forms on behalf of staff to LGS please ensure that you do so as promptly as possible to prevent any disputes about unexpected delays in LGS acting on the member's instruction. It's important to make sure that all forms are sent in as quickly as possible as it can be hard to tell whether or not they contain a section where delay could disadvantage or inconvenience the member.

Meet the team: Wagga Wagga

The Wagga Wagga office has a new Regional Manager, Ian Hamilton, who is on hand to help you with all your superannuation and financial planning needs.

But Ian is no stranger to the office or NSW South West region. He joined the office as a financial planner in 2003 and has been living in Wagga Wagga for nearly 20 years. "Raising a family in the setting of the Riverina region provides a great balance between city and rural living," he says.

Ian is also no stranger to super either. He joined the super industry in 1984 and became a financial planner in 1993.

Commenting on his new role, he says: "I am most looking forward to utilising my skills to enhance FuturePlus Financial Services' presence in the region and to continue with my team to provide a quality service to members."

Other members of the Wagga Wagga team include:

Karen Clemson - Member Services Manager. Karen is responsible for the day-to-day operations of the office and ensuring timely and accurate service is provided to members and employers within the Wagga Wagga region. Karen has a background in Human Resources, Payroll and Finance, having worked in a private Correctional Centre and Rail Transport over the last 14 years.

Bill Halliwell - Client Relationship Manager. Bill's role is to conduct worksite visits in the area. He discusses issues relating to superannuation and provides up-to-date information to all employers. He conducts retirement seminars throughout the year. Bill has 28 years' experience with Centrelink and has a thorough knowledge of the benefits available to all members.

Vicki Wykes - Member Services Officer. Vicki, who completed a traineeship with FuturePlus Financial Services, provides high service standards to members, ensuring all enquiries are handled in a prompt and efficient manner.

Administration update

New members

In line with the LGS rules, we are not permitted to create a new member account without having received a contribution for the account. Please advise of any new members when providing their initial contribution rather than providing the new member advice prior to sending the contribution.

You can provide the new member details in the contribution file or separately, but if you have a separate new member file, please send it at the same time as your contribution file. Please ensure that you include the new employee's full given names and surname, date of birth, address, date they commenced employment and their Tax File Number.

Contributions

Contributions are only allocated to a member's account when we have received both the money for the contribution and the file or paperwork. This means if you send the money today, but don't send the file or paperwork for two weeks, the money will be allocated to the member's account effective the date the file or paperwork was received, because we require both pieces of information before we can process the contribution.

When remitting a contribution payment, please ensure that the file you send equals the payment. Please do not send multiple payments with one file or one payment with multiple files. We would prefer that a separate payment be made for each file. The likelihood of human error is reduced when there is a single payment and a single file.

Incorrect arrears/unallocated receipts on Retirement Scheme (Division B) bills

There is currently a defect in the system where pre-defined contributions received after a member exits cannot be processed to the member's account. They do not affect the "Contribution Due" section of the bill, thus causing incorrect arrears or unallocated receipts. This defect also stops other contributions being processed for that member - these show as unallocated amounts under "Contributions Received" on page 1 of the bill. This defect is currently being investigated and will be corrected.

Credit and debit arrears for exited members on Division B bills

When an employee ceases employment, contributions are not due for the month the member ceases employment, unless they exit on the last day of the month.

Please review your monthly bill and if there are credits on your bill for employee, employer or basic benefit contributions in respect of exited members you should take these contributions up if you are not already doing so. You can take up credits by adding the exited member to your next contribution file with negative values equal to the credits on the bill.

If you have already done this and the contributions have not been processed due to the defect advised above, please do not resubmit as once the defect is corrected all adjustments will be processed.

We are currently reviewing the employee arrears on the bills, but if there are employer or basic benefit arrears on your bill in respect of exited members you should remit these contributions as they were outstanding at the time the member ceased employment.

If you have already done this and the contributions have not been processed due to the defect advised above, please do not resubmit as once the defect is corrected all adjustments will be processed.

Division B annual salary review spreadsheets are due

In early December, we sent you the "2009 Salary Listing" in an Excel file format, together with explanatory documentation, and asked you to update it as part of the Retirement Scheme's 2009 Annual Salary Review process.

This information is needed to enable us to process the new salaries, combine them with members' newly elected percentage rates and calculate all member contribution rates in time for the new superannuation year commencing 1 April 2010.

If you haven't already done so, please return the salary listing to us as soon as possible.

Reminder about how to calculate Superable Salary in the Retirement Scheme for packaged or contract employees

The Superable Salary for the Retirement Scheme for packaged or contract employees should be calculated as per the following formula:

Superable Salary = TRP / (1 + AAC Factor (as a Percentage))

Where:

TRP is the employee's Total Remuneration Package

AAC Factor is the Assessed Annual Cost (expressed as a percentage)

The formula used to calculate the AAC Factor is

AAC = ACR x F + B

Where:
ACR is the Average Contribution Rate
F is the EFB notional oncost factor (currently 1.9)
B is the BB notional oncost factor (currently 2.5%)

Below is an example of how the AAC Factor would be calculated for a Retirement Scheme member with an ACR of 5.32% using the current notional oncost factors.

	AAC	= (ACR x F + B)
		= 5.32 x 1.9 + 2.5
		= 12.61%*
		
*always rounded to 2 decimal places.

To assist employers calculate Superable Salary uniformly, the applicable AAC Factor for each member is calculated annually at December and supplied with the Salary Request to enable you to calculate Superable Salaries for 31/12 each year.

The AAC Factor has also been added to the monthly billing reports to assist you with calculating Superable Salary for Exits. Note that the AAC factor does not change each month, unless there is a backdated change to the Member's data affecting the factor.

In recognition that historically other arrangements for calculating Superable Salary for Retirement Scheme members may have been in place, a transitional provision applies to ensure that members are not adversely affected by the enforcement of applying the AAC Factor for this calculation.

Under the transitional arrangements, if the Superable Salary using a previous method is greater than the Superable Salary arrived at using the correct method, then the previously advised higher salary can continue to be used but it cannot increase (unless it is due to the correct formula producing a higher salary figure).

Note that the changes to billing factors from 1 July 2009 do not impact the AAC Factor as it is calculated using the notional or long-term contribution rates, not the current billing rates.

If you have any questions about this, please contact Employer Services on 1800 636 441.

Billing rates in the Retirement and Defined Benefit Schemes to remain unchanged for the 2010/11 financial year

The Board determined in late 2009, based on advice and on the Actuary's recommendation, that the employer contribution rates for 2009/10 will be unchanged for the 2010/11 financial year.

We have previously indicated that the increased contribution rates would remain for the required 10 year period unless investment markets improve. While the investment return for this year is well ahead of the budgeted 7% p.a. (the investment return has been approximately 13.5% for the 6 months to December 2009), the funding of our defined benefits obligations is still in significant deficit.

The Board is mindful that these superannuation obligations will continue to impose a burden on Council's budgets. However, it has an overriding fiduciary duty to ensure the security of member benefits.

Reduction in contribution caps

Employers should be aware that employees salary sacrificing may be at risk of exceeding the new contribution caps and of incurring excess contributions tax.

In the May 2009 Federal Budget, the Government halved its cap on the amount of concessional (or pre-tax) contributions members can make to super to $25,000 a year (indexed). This change came into effect on 1 July 2009.

Income that's salary sacrificed as additional superannuation contributions is counted towards the concessional contributions cap, as is the 9% Superannuation Guarantee.

The transitional concessional contributions cap (for members aged 50 and over or who turn 50 before the end of the 2011/12 financial year) has also been reduced from $100,000 to $50,000 a year.

The annual cap on non-concessional or after-tax contributions remains at $150,000 per annum for the 2009/10 financial year. It will in future be calculated as six times the level of the (indexed) concessional contributions cap.

Excess concessional contributions are currently taxed at 31.5% in addition to the standard 15% contributions tax. So, to help your staff avoid any nasty surprises, it's important to review any salary sacrifice arrangements you make on their behalf. LGS has a procedure in place designed to alert members to the fact that they are approaching their concessional or non-concessional caps but this will not be foolproof as members may have super accounts elsewhere which we can know nothing about. In the end it is the member's responsibility to ensure that they don't exceed the caps but if we can help prevent it happening it will make life easier for the members and for us.

Keep us up to date

Please keep us informed about any changes to your employer contact details or about any changes in personnel. We need to keep our contact information up to date (especially for payroll, SLOs, HR/Finance Managers, General Managers and Mayors) so that we can efficiently communicate any important information or administrative changes to the right people. Any updates can be emailed to: employerservices@lgsuper.com.au

Quarterly investment returns

December quarter 2009 returns for the Contributor Financed Benefit - Retirement Scheme

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.
* Available to Retirement Scheme members only.

December quarter 2009 returns for the Accumulation Scheme

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.

Quarterly Superannuation Guarantee (SG) Contributions

Under the SG requirements all employers must contribute the minimum level of 9% of each eligible employee's earning base in super support for each financial year. The SG contribution is required to be contributed on at least a quarterly basis. From 1 July 2008, your employees' earning base is their ordinary times earnings (OTE).

The following describes the ATO deadlines for employer contributions and the penalties that may apply if employers do not meet them. Local Government employers who make monthly contributions in accordance with the Scheme rules will more than satisfy these minimum requirements and will therefore avoid any of the penalties listed.

The ATO imposes penalties if SG contributions are not made by the quarterly cut-off date by applying an SG Charge (SGC)* which is made up of three parts:

• SG shortfall amounts based on ordinary times earnings (OTE)
• Interest on that amount (currently 10% per annum)
• Administration fee of $20 per employee per quarter.

If the SGC and the SGC statement are not submitted by the due date for lodgement additional penalties may apply and these are:

• General Interest Charge (GIC) from the SGC due date will be incurred. GIC compounds daily until SGC and accrued GIC are paid in full. The ATO can reduce the penalty. GIC is tax deductible in the year it is incurred.
• An amendment in the SG legislation, from 24 June 2008, means that if an employer makes an SG contribution to a superannuation fund which is late the employer can elect to have this contribution used to offset against the amount of SG charge they have to pay to the ATO for not meeting their superannuation obligations. Please refer to the ATO website for further information at www.ato.gov.au.
• Penalties may also apply for false or misleading statements, avoidance, failure to provide information or failure to keep SG records.

The following table obtained from the ATO lists the standard cut-off and lodgement dates.

* The SGC is not tax deductible and cannot be reduced by the ATO.

Would you like to see more of us?

As part of our service to you we offer free pre-retirement seminars to your employees, either on your site or at a venue close to you. If you'd like to organise a free seminar for employees, please call 1800 636 441.

Free pre-retirement planning seminars

Pre-retirement seminars are targeted at people who are over 50 years of age and provide information on the following:

• Maximising Super Benefits
• Decision Time
      - Income Streams in Retirement
• Centrelink
      - Age Pension & Allowances
      - Asset and Income Tests
• Financial Planning
      - The importance of qualified Financial Planning advice
      - Estate Planning
  Refreshments are provided.

For details of the forthcoming Pre-Retirement Seminars, click here.

Office locations

Lismore
81-83 Molesworth Street

Newcastle
161 King Street

Orange
187 Summer Street

Sydney
28 Margaret Street

Parramatta
10-14 Smith Street

Wagga Wagga
2/209 Baylis Street

Wollongong
Shop 2/60 Burelli Street

Albury*
621 Dean Street
*Note: Bookings are essential.

Are you sending your communications to the right place?

The following is a one-stop reference guide to all the relevant contact numbers and addresses through which employers are to send communications.

Fax
All employer faxes are to be sent to: 02 9299 9321

Contribution Return Emails
All Contribution Return e-mails are to go to the following e-mail address: employeronline@lgsuper.com.au

All Other E-mails
employerservices@lgsuper.com.au

Telephone
For all employer inquiries, please call 1800 636 441

Writing
If you are writing to Local Government Super, please address the letter as follows:
Local Government Super
PO Box N835 Grosvenor Place
NSW 1220

Please note that the information contained in this document is of a general nature only and does not constitute personal advice as it does not take into account your personal objectives, financial situation or needs. Any advice in this document is provided by FuturePlus Financial Services Pty Limited (ABN 90 080 972 630) as an Australian Financial Services Licensee (AFSL 238445) on behalf of the Trustee of Local Government Super, LGSS Pty Limited (ABN 68 078 003 497). LGSS Pty Limited is an APRA Registrable Superannuation Entity Licensee (ABN Pool A - 74 925 979 278 and ABN - Pool B 28 901 371 321). A reference to Local Government Super refers to Local Government Superannuation Scheme Pool A and Pool B as the context requires. Local Government Super is a registered business name of LGSS Pty Limited. Members should not rely solely on this information and should consider their own personal objectives, financial situation and needs before acting on this information. Prior to making any investment decision you should obtain and consider the relevant Product Disclosure Statement (PDS) pertaining to your membership and seek professional investment advice.