EXPLANATORY STATEMENT INSTRUMENT NO 2 OF 1993
ISSUED BY THE AUTHORITY OF THE MINISTER FOR DEFENCE SCIENCE AND PERSONNEL
MILITARY SUPERANNUATION AND BENEFITS TRUST DEED (AMENDMENT)
The Schedule to the Trust Deed made by the Minister for Defence Science and Personnel under section 5 of the Military Superannuation and Benefits Act 1991 ("the MSB Act") contains Rules ("the MSB Rules") which deal with:
- the contributions to be made by members of the Defence Force who are members of the Military Superannuation and Benefits Scheme (''the MSB scheme") established by the Trust Deed in accordance with section 4 of the MSB Act; and
- the benefits to be provided to members of the MSB. scheme upon retirement or to dependants of deceased members of the scheme.
The Minister is empowered, by subsection 5(1) of the MSB Act, to amend the Trust Deed (including the MSB Rules), by an instrument which, by subsection 49(1) of the MSB Act, is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.
The operation of the MSB scheme has revealed a need for minor improvements to the administration of the scheme and for some minor corrections to the MSB Rules. The Instrument amends the rules accordingly.
- Interpretation
Clause 1 defines expressions used in the Instrument.
2. Amendment
Clause 2 is formal.
3. Application
Clause 3 applies the amendments made to rule 16 with effect from the commencement of the MSB Scheme.
4. Rule 16(Limitation on certain benefits in case of certain transferees who retire before completing 731 days' service after 30 September 1991)
On transfer from the Defence Force Retirement and Death Benefits (DFRDB) scheme to the MSB scheme, a member accrued an addition to his or her benefits because he or she was immediately credited with notional interest on his or her
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contributions under the DFRDB scheme. This addition was substantial in the case of the longer-serving members and could have acted as an attraction to these members to access this addition by retiring soon after transfer. Rule 16 of the MSB Rules acts as a restraining mechanism on the resignation of members during the first 2 years after transfer. It provides that a transferee who resigns during that period incurs a proportionate reduction in the notional interest element of his or her lump sum member benefit accrued before transfer.
Subrule 16(3) is interpretative and has the effect that, although the reductions imposed by the rule do not ordinarily apply to members who are entitled to invalidity benefits, the reductions nevertheless apply to persons whose services are terminated on the ground of invalidity but whose incapacity for civil employment is not sufficiently serious to entitle the person to an invalidity pension, ie persons who are classified Class C. It is not considered appropriate that the reduction should apply to a person who is classified Class C and whose retirement therefore is entirely involuntary, and subclause 4.1 amends subrule 16(3) accordingly.
One of the factors in the formula in subrule 16(1) is the number of days of contributory service by the member which is defined as the number of such days after 30 September 1991.
As drafted, this has the effect of excluding days on which the member was precluded from contributing solely because the member completed 40 years contributory service under the DFRDB scheme or reached his or her maximum benefit limit. Such a member is subject to the restricted access to notional interest imposed by rule 16 even though the person had, on retirement, completed in excess of 731 days of service since 30 September 1991. This is not the intended effect.
Subclause 4.2 accordingly inserts a definition of "contributory service" which expands the meaning of that expression in rule 16 to include days on which the member was precluded from contributing solely because the member completed 40 years contributory service under the DFRDB scheme or reached his or her maximum benefit limit.
5. Rule 19(Functions of Committee)
Rule 19 of the MSB Rules lists the functions of an Incapacity Classification Committee established by the Board of Trustees under rule 17. These functions are currently the exercise of the power of classification and reclassification of retirees with regard to invalidity benefits, conferred on the Board by rules 22 and 23. Related functions conferred on the Board by rules 32, 33 and 34 are those of satisfying itself whether or not the person's invalidity is due to:
(a) a condition which predated the person's entry into the Defence Force; or
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(b)
(c)
an intentional act committed by the person for the purposes of obtaining invalidity benefits under the scheme; or
a condition which happened while the person was on extended absence without leave.
It is appropriate for these functions to be carried out in the first instance by the Committee and subclause 5.1 amends subrule 19(1) to add this function to the list. The power to perform these added functions is conferred by amendments made to the rules in question, see clauses 12, 13 and 14 of the Instrument.
It is also appropriate for the exercise of the function conferred on the Board under new rule 22A(Interim classifications), inserted by clause 7, to be carried out in the first instance by the Committee and new rule 22A permits this. Subclause 5.1 amends subrule 19(1) to add this function to the list.
6. Rule 22(Classification in respect of incapacity)
Rule 22 of the MSB Rules provides a system of classification of incapacity for civil employment of members retired on the ground of invalidity, The classification given governs the entitlements of the person under the Rules. The classifications and the corresponding degrees of incapacity are Class A (60% or more), Class B (30% or more but less than 60%) and Class C (less than 30%). This rule requires amendment consequent on the introduction of interim classifications by new rule 22A.
Subclause 6.1. amends subrule 22(1) to recognise that interim classifications may be made under new rule 22A.
7. New rule 22A(Interim classification)
When a member retires on the ground of invalidity, it may take some time to accumulate the information required to assess the degree of incapacity of the person for civil employment. For example, it is usually necessary for the person to undergo examination by one or more specialists. Although, in the event of the person being classified as Class A or B, the pension will be payable from the date of retirement, payment of the pension cannot begin until the degree of invalidity has been assessed and the classification made.
Clause 7 inserts a new rule 22A which will enable immediate payment of a pension in cases where the Board of Trustees or the Incapacity Classification Committee is satisfied that the person's incapacity will be at least Class B but cannot immediately determine whether the person should be classified Class A or B.
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Subrule (1) authorises the making of an interim classification of Class B thus enabling payment of pension to begin at the Class B rate.
Subrule (2) requires the interim classification to be reviewed
at intervals of not less than 3 months.
Subrule (3) requires the interim determination to be cancelled when sufficient information is available to enable a classification of incapacity to be made under rule 22. If
the classification then made is:
(a) Class A: pension is increased to the Class A rate from the date of retirement.
(b) Class B: the rate remains unchanged.
(c) Class C: payment of pension ceases but the recipient is not required to refund the pension already paid.
Subrule (4) excludes the application of the rule to cases which are excluded from the operation of rule 22. In other words, an interim determination cannot be made in respect of a person who is not entitled to invalidity benefits because the person's services were terminated on account of:
(a) a condition which predated the person's entry into the Defence Force; or
(b) a condition due to an intentional act committed by the person for the purposes of obtaining invalidity benefits under the scheme; or
(c) a condition which happened while the person was on extended absence without leave.
8. Rule 23(Reclassification in respect of incapacity)
Rule 23 of the MSB Rules empowers the Board of Trustees or an Invalidity Classification Committee to review the classification for incapacity for civil employment of an invalidity pensioner or former invalidity pensioner 'and thus allows account to be taken of any improvement or deterioration in the person's capacity for civil employment. This rule requires amendment consequent on the introduction of interim classifications by new rule 22A.
Subclause 8.1 amends paragraph 23(8)(b) to ensure that a person, in respect of whom an interim classification applies under new rule 22A but who is subsequently classified Class C, is not eligible for reclassification under rule 23. In other words, the person is treated as if he or she had been classified as Class Con retirement.
Subrule 23(7) provides that a person may be reclassified in spite of having died and subclauses 8.2 and 8.3 amend the definition of "prescribed physical or mental impairment" in
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subrule 23(10) to clarify its application to a deceased person.
9. Rule 24(Decision as to classification or reclassification to be notified to invalidity retiree)
Rule 24 of the MSB Rules requires the Board of Trustees to notify an invalidity retiree of the result of, and the reasons for, his or her classification or reclassification for incapacity for civil employment. This rule requires amendment consequent on the introduction of interim classifications by new rule 22A.
Subclause 9.1 amends rule 24 to require a member to be notified of an interim classification under new rule 22A.
10. Rule 26(Entitlement to invalidity benefits)
Rule 26 of the MSB Rules provides that persons classified as Class A or Class B incapacity for civil employment are entitled to invalidity benefits in accordance with Division 2 of Part 3 of the Rules. This rule requires amendment consequent on the introduction of interim classifications by new rule 22A.
Subclause 10.1 amends rule 26 to include a person with an interim classification under new rule 22A as a person entitled to an invalidity benefit.
11. Rule 30(Person may be treated as having been retired on ground of invalidity)
Rule 30 of the MSB Rules deals with the case of a person who was retired otherwise than on the ground of invalidity but it is subsequently discovered that a medical condition existed which could have justified the person being retired on the ground of invalidity. The rule empowers the MSB Board to treat the person as having been retired on the ground of invalidity, and also provides that, if the person is classified as Class A or B incapacity for civil employment, the preserved benefit of the amount of the person's employer benefit previously applicable ceases to apply and that person becomes entitled to an invalidity pension. This rule requires amendment consequent on the introduction of interim classifications by new rule 22A.
Subclause 11.1 amends subrule 30(2) to ensure that rule 30 applies to a person who has an interim classification under new rule 22A.
12. Rule 32(Pre-existing condition)
Rule 32 of the MSB Rules disqualifies a person for invalidity benefits where the person is retired within 2 years of entry because of a medical condition which pre-dated the person's entry into the Defence Force, and provides that, if the person re-enters the Defence Force and is subsequently again retired
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on the ground of invalidity, it is the person's medical
condition on re-entry which is relevant.
Subclauses 12.1 and 2 amend subrules 32(1) and (lA) to provide that the power conferred on the Board of Trustees to make a decision as to the circumstances of the person's invalidity may be exercised by an Incapacity Classification Committee.
13. Rule 33(Invalidity due to intentional act)
Rule 33 of the MSB Rules disqualifies a person for invalidity benefits where the person retired on the ground of invalidity because of a condition intentionally incurred in order to obtain invalidity benefits.
Subclauses 13.1 and 2 amend subrules 33(1) and (2) to provide that the power conferred on the Board of Trustees to make a decision as to the circumstances of the person's invalidity may be exercised by an Incapacity Classification Committee.
14. Rule 34(Invalidity arising during absence without leave exceeding 21 days)
Rule 34 of the MSB Rules disqualifies a person for invalidity benefits where the person is retired on the ground of invalidity because of a condition which was incurred while the person was absent without leave for a period exceeding 21 days.
Subclauses 14.1 and 2 amend subrules 34(1) and (2) to provide that the power conferred on the Board of Trustees to make a decision as to the circumstances of the person's invalidity may be exercised by an Incapacity Classification Committee.
15. Rule 44(Death in certain cases due to retirement
disabilities)
Rule 44 of the MSB Rules deals with the case of a member who becomes an invalidity pensioner and subsequently dies from the condition (or a causally connected condition) which caused him or her to be invalided. The effect of the rule is that the spouse and children are entitled to benefits as if the deceased pensioner had been in receipt of a Class A invalidity pension, although he or she may have been in receipt of a Class B pension or may have been reclassified as Class C and hence not in receipt of an invalidity pension. This rule requires amendment consequent on the introduction of interim classifications by new rule 22A.
Subclause 15.1 amends subrule 44(2) to ensure that rule 44 also applies where the deceased person had an interim classification under new rule 22A.
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16. Rule 56(Increases in pensions and certain unfunded preserved benefits)
Rule 56 of the MSB Rules provides for pensions and unfunded preserved benefits to be increased in July each year in line with the percentage increase in the consumer price index.
Subrule 16.1 corrects a drafting error in the definition of B in subrule 56(2).
17. Rule 79(Interpretation)
Rule 44 of the MSB rules treats a determination or decision of the Incapacity Classification Committee established under rule
17 as a decision of a delegate thus making those determinations and decisions subject to reconsideration under Part 9 of the Rules. This rule requires amendment consequent on the conferring of additional functions on the Committee under the amendments to rules 32, 33 and 34 (by clauses 12, 13 and 14), which deal with certain invalidity retirees who are not ordinarily entitled to invalidity benefits.
Subclause 17.1 amends rule 79 to ensure that decisions of an Invalidity Classification Committee under the additional powers conferred by rules 32, 33 and 34, as amended, (which are in Subdivision C of Division 2 of Part 3 of the Rules), are subject to reconsideration under Part 9.
18. Schedule 7(CALCULATION OF FINAL AVERAGE SALARY)
Schedule 7 to the MSB Rules describes final average salary, a concept used principally in calculating a member's employer benefit. Paragraph 1 provides that it generally means the average annual salary payable to the person in his or her last 3 years of eligible service. The 3-year period is expressed as "78 salary pay-days" but a more accurate calculation of final average salary could be made if this period were expressed as 1095 days' service.· Furthermore the references to "eligible service" should be references to "service".
Subclause 18.1 replaces Schedule 7 with a new schedule incorporating these changes.
19. Schedule 8(CALCULATION OF EMPLOYER BENEFIT)
Schedule 8 to the MSB Rules describes how a person's employer benefit is calculated.
Subclause 19.1 corrects a drafting error in one of the tables.
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