Our People, Our Processes - Reports
Ordinary Meeting - 25 July 2012
In 1993 the State Government closed the Defined Benefit Scheme abandoning the 30 year funding plan. It has been closed to new members since 1 January 1994. Only those employees who were employed by an Authority prior to 1994 and have continuously remained employed by a Victorian Authority since that time, or those people who have retired on the scheme and their spouses, are members. In 1995 the Scheme had $217 million of unfunded liability. Local Government reform resulted in 4,670 retrenchments in 18 months placing extreme pressure on the Scheme. In 1998 the State legislation was repealed and the LASF became regulated by the Commonwealth Government. These changes meant that since that time the Scheme has differed from other defined government superannuation schemes in that this regulation “requires” local government to be fully funded. As a result of this requirement there have been a number of calls on the local government sector to provide additional funding to "top up" the scheme. Nationally all states have a defined benefits scheme, and all are Australian Prudential Regulation Authority (APRA) regulated. They are required to be fully funded and for any shortfall in the fund a contribution is required. The impact is varied because of the number of active members. New South Wales had a very similar issue in 2009, where there was a significant call in of around $300 million. The shortfall was funded by increasing employer contributions, as they had a much larger pool of active employees still contributing to the fund. Their super contribution increased dramatically as a result of the 2009 shortfall. The first call impacting the Victorian Local Government sector was in 1998, when the call of the shortfall of the fund of $321 million was directly required to be paid by employers. The CoGB has had a number of calls over the years to contribute towards scheme shortfalls. In previous years the CoGB share of the shortfall and subsequent contributions have been: 1998 2003 2010
$6.87 million (Borrowed interest repaid during term $2.3 million) $2.9 million (Borrowed interest repaid during term $253,000) $1.9 million (Funded from cash reserves) Total: $14.2 million
Information provided by the Municipal Association of Victoria (MAV) on the 2nd July 2012 confirmed that the aggregate Defined Benefit shortfall for the Victorian sector is expected to be approximately $450- $460 million plus a 15% contributions tax (Federal Government Tax). The Scheme includes Victorian councils, library corporations, water authorities, crematoria, cemetery trusts and MAV employees. Of this overall amount, the shortfall and aggregate for Councils is approximately $400 million plus a 15% contributions tax.
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