Misclassifying superannuation fund members as being in a dangerous occupation or missing members in these roles is a potential high-risk area for administration areas, according to Rice Warner.
As the Treasury Laws Amendment Putting Members’ Interests First (PMIF) Act 2019 life insurance opt-in regime introduced exemptions to emergency services works or those in a dangerous occupations, trustees need to consider their strategy for determining these members early, according to Rice Warner.
An analysis by the research house said the funds needed to focus on member communications to try and reduce the risk of misclassifying a member in one of these roles or missing a member in a dangerous occupation.
“It will be a challenge for most funds to think through and execute exemptions in time for the 1 April 2020 introduction of PMIF, given the need to communicate in advance with members,” the analysis said.
“An exemption can be applied for at any time and, whilst this may therefore be a consideration that develops into the longer term, it is also important that funds consider their strategy early.”
It noted that even if a fund could confidently identify dangerous occupations of members, and that contributions were being received from employment in that occupation, there were still further considerations.
“It will need to review the value of opt-out insurance and what changes to policy terms will achieve the most appropriate outcome for all members, considering risk and impact on premiums,” Rice Warner said.
“Further, where premiums increase for any member segment as a result of applying for an exemption, trustees will need to understand the impact on account erosion.”
However, Rice Warner also said there was no data that met the exact requirements of the act, including the identification of dangerous occupations.
It pointed to information from the Actuaries Institute Australia that gave insight to the variations in how the riskiest quintile of occupations might be constructed. These were:
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