It sounded almost as if it was an afterthought, but when Treasury superannuation principal adviser Jonathan Rollings flagged an opt-out procedure for any transfers of account balances into MySuper, a few ears pricked up during the Association of Superannuation Funds of Australia (ASFA) Super Compliance Summit last month.
Rollings' announcement of an opt-out procedure was confirmed in the third tranche of the MySuper draft legislation, published last week, but the implications of the measure are somewhat murky, especially as to what it means for the status of members as a choice or a disengaged default member.
Paragraph 7.46 of the draft legislation states that "it is intended that amendments to the Corporations Act or Corporations Regulations will require trustees to contact members, where possible, and provide them with the ability to opt out from having their balances transferred".
This seems to imply super funds will need to contact all members who will have their balances transferred.
Whether the member agrees or not, the process seems to result in the member having to make a choice and they could, therefore, be regarded as a choice member.
This could create an opportunity for funds to reduce the number of members they are required to roll into the MySuper option.
The second implication is that if a member says "no, I don't want to be transferred to MySuper", where do they go?
The obvious answer is the default option, but many funds are looking to transform their default option into a MySuper option, and as a result the original default no longer exists.
Will they have to run two similar options?
Rollings said at the ASFA conference that this was a matter for funds themselves.
However, the regulation does seem to give an answer, albeit not definitive.
Paragraph 6.26 of the legislation has this to say about transfers: "The transfer of a member's accrued default amount to a MySuper product would generally constitute a significant material change to members' rights in relation to the fund and require a significant event notification as required by the Corporations Act.
"However, in some cases, there may be only immaterial changes to members' rights as a result of the RSE (registrable superannuation entity) licensee being authorised to offer a MySuper product, for example, if an existing default investment option is simply able to be converted into a MySuper product."
It seems that where a super fund applies for a MySuper licence for an option that is identical to its current default fund, the fund will be exempt from issuing a significant event notification.
Through this, the government has created the opportunity to apply for a MySuper licence for the default option without actually having to transfer any money at all and, therefore, the fund will not be required to contact members.
If this is the case, the implementation of MySuper will be simply a matter of registering your default fund option.
