A new taskforce will advise the Municipal Association of Victoria (MAV) Board on a campaign to reinstate the Local Authorities Superannuation Fund (LASF) Defined Benefit Plan as an exempt public sector scheme.

 

Mr Rob Spence, Chief Executive of the MAV said unfair rules required local government to maintain a fully funded super scheme which would require councils to top up a $396.9 million shortfall from 1 July next year.

 

“Vision Super’s advice on contributions for each council is imminent, and this week we’ll finalise membership of an MAV Superannuation Taskforce to steer reforms that protect communities from future uncertainty.

 

“Although it was closed to new members in 1993, current laws require local government’s defined benefit scheme to hold enough funds to meet the retirement benefits owed to members now and into the future.

 

“If current assets fall below what’s needed to pay current and future benefits, then employers are required to make top-up payments. It’s proving a volatile and unpredictable model that councils can’t plan ahead for.

 

“An exemption for other public sector schemes allows the Australian Government to have an unfunded defined benefit liability of around $61 billion. The Victorian Government’s liability exceeds $29 billion.

 

“At a briefing on 4 July councils agreed to unite to fight for legislative reform that puts local government on equal footing with exempt state and federal schemes.

 

“As well as seeking legislative changes, we’ll continue our negotiations with the State for councils to access lower borrowing rates through the Treasury Corporation of Victoria to help pay the shortfall.

“We’ll also call for the Australian and Victorian governments to remove the 15 per cent contributions tax that councils must pay on their shortfall payments, plus WorkCover liabilities associated with call-ins,” he said.

 

Vision Super is a regulated industry fund that’s neither owned nor operated by the MAV. The MAV holds two local government positions on the eight-member Vision Super Board, while nominees from the Australian Services Union (ASU) hold four positions; the Victorian Water Industry Association (VWIA) holds one Board position; and the Victorian Employers Chamber of Commerce and Industry (VECCI) holds one position.

 

When the LASF Defined Benefit Plan closed in 1993 it had 38 000 members and 7 500 lifetime pensioners. As at December 2011 it had 4 949 active members (with an average age of 54 years) and 5 132 lifetime pensioners (with an average age of 79 years). Liabilities will continue to decline over the next 20 years.

           

Mr Spence said that councils were not to blame and had been left with the legacy of a former scheme that was compulsory when established by the Victorian Government thirty years ago.

 

“After the State shut the LASF Defined Benefit Plan in 1993 all councils were required to sign legally binding agreements to continue funding benefits for staff that had been part of the scheme.

 

“We’re seeking further advice on future options for the scheme, but we think it will be cost prohibitive for councils to negotiate payouts with all remaining members and pensioners in lieu of their defined benefits.

 

“We’re hopeful that a show of unity by local government will help to secure a transition back to a State-managed scheme that removes the requirement for councils to make top up payments,” he said.

 

A fact sheet provides further details on the LASF Defined Benefit Plan.