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Super taskforce to investigate defined benefit wage cap
The Municipal Association of Victoria's (MAV) Superannuation Taskforce will investigate a salary rate movement cap for Vision Super's defined benefit (DB) members as a way to resolve its current DB shortfall.
MAV said it would assess setting a cap for wage movements based on actuaries' projections of long-term wage rate movements. Excess payments would be rolled into an accumulation account to reduce the exposure of super funds to an actuarial shortfall.
The move is one of 19 recommendations the taskforce has suggested to reduce the effect of calls on councils, to reduce employers' liabilities in relation to the scheme, and to oversee the super fund's governance and performance.
MAV President Cr Bill McArthur said a shared solution among government, employer and super funds was necessary.
McArthur said there was no "silver bullet" - but a simple step towards achieving the objectives would be for Vision to align its actuarial review with the councils' yearly budget cycles.
He said key reform recommendations included access to cheaper borrowing rates, reviewing the methodology and budget allocations for shortfalls, waiving ancillary government costs, and greater awareness of wages and investment returns that could impact the liability.
"The Australian and Victorian governments can assist by helping councils to access cheaper borrowing rates, plus removing WorkCover liabilities and the 15 per cent contributions tax to save councils over $82 million.
"However, local government can also progress other solutions such as increasing employer and employee contributions; more frequent monitoring of the Local Authorities Superannuation Fund's performance and salary movements; and annual allocation of shortfall funds in council budgets to smooth payments over time," he said.
It said Vision Super's defined benefit (DB) scheme should be removed from the Superannuation Industry (Supervision) (SIS) Act or be exempt from some SIS requirements if it would reduce the burden of future calls on employers.
Councils have been called on to fund the DB shortfall on four occasions - but last year's shortfall of $453 million with $396.9 million payable by councils and due on 1 July 2013 set a record and prompted many councils to lobby the Government to amend legislation.
The taskforce was formed in July last year to lobby government to remove the burden on local councils to fully fund shortfalls arising from Vision's DB scheme by returning to a state-managed scheme.
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