Frequently Asked Questions - Superannuation trustees' response to COVID-19
To help superannuation trustees understand their new and ongoing responsibilities during this period of disruption, APRA and ASIC have published superannuation frequently asked questions (FAQs) on each agency’s website. These FAQs will be updated periodically over the coming weeks and months and we encourage trustees to check the page regularly.
The FAQs from ASIC are available on their website.
The new FAQ number 13 on processing payments where the ATO revokes a determination for the temporary early release of superannuation benefits is available below.
Latest update: 6 May 2020.
1. In light of the additional pressures on the administration of superannuation funds, what action should trustees be taking?
Trustees should be working closely with their administrator to identify critical business activities, and the extent to which those functions can continue where the administrator experiences material disruption. In APRA’s view, critical activities include the day-to-day payment of benefits, processing rollover requests, investment switches and early release payments. Trustees must ensure their administrator has in place contingency plans for those activities. This is particularly critical for aspects of the administration function that are conducted offshore.
2. Will APRA continue with the Super Data Transformation project?
The Superannuation Data Transformation project will continue, however there will be a one year deferral for data collections from funds until September 2021.
Enhancing the superannuation data collection to collect accurate and comparable data on the superannuation industry is essential to enable appropriate regulatory oversight, and transparency and accountability for trustees. Access to comparable and consistent data is essential for maintaining the stability of the superannuation industry and assessing the potential long term impacts of the COVID-19 pandemic on the superannuation system.
APRA will continue its internal work on the project to assess the pilot data received and finalise the remaining topic papers for Phase 1. Where trustees have capacity to engage on the project, APRA will look for new, and flexible ways to work with funds so that once the environment stabilises we are well placed to finalise the consultation process.
3. Is APRA providing trustees relief from complying with SPS515 Strategic Planning and Member Outcomes, in particular the requirement to undertake a business performance review (BPR) by 31 December 2020?
No. APRA considers that the current conditions make it even more critical for trustees to be undertaking an assessment of the performance of their business operations, including an analysis of how their operations are impacting on member outcomes APRA expects trustees to be undertaking most of the analysis needed to comply with the requirements of the BPR. APRA will continue its work on addressing underperformance and holding entities to account.
4. APRA has some data queries underway with certain trustees - are these continuing?
Yes. APRA supervisors will continue discussions with these trustees to ensure that outstanding queries are resolved. APRA considers it critical that the next iteration of the MySuper Product Heatmap, planned for December 2020, is based on data which has been validated by APRA.
However, noting the current operational challenges faced by trustees, APRA is open to providing extensions to requests for outstanding information requests, where needed.
Trustees are encouraged to discuss timeframes with their responsible supervisor.
5. Should trustees continue to undertake a trial outcomes assessment?
APRA has been encouraging trustees to undertake a trial outcomes assessment in 2020, covering all or a subset of its MySuper and choice products. A trial outcomes assessment would be expected to provide RSE licensees with insights into the methodology, data and publication issues that may arise in respect of the outcomes assessment. Where trustees have the capacity to undertake this trial, they are encouraged (but not required) to do so, and to engage with APRA supervisors on the trial process and outcomes.
6. Will APRA’s superannuation publications be released as planned?
APRA’s regular statistical publications will continue, and trustees must therefore endeavour to meet their data reporting requirements as normal. As always, trustees should contact APRA at DataAnalytics@apra.gov.au and their responsible supervisor where they experience difficulty in satisfying their reporting obligations within the required timeframes.
7. Will APRA publish the updated MySuper Product Heatmap with updated fee data in June 2020?
Yes. As announced on 19 March 2020, APRA is committed to publishing the updated MySuper Product Heatmap with updated fees and costs data in June 2020.
8. Will APRA proceed with thematic activity relating to outsourcing and conflicts management, which had been planned for 2020?
APRA will postpone the commencement of this important piece of work until Q4 2020. Impacted RSE licensees have been contacted directly.
9. Will APRA take action against trustees for breaching the three-day portability rule?
Whilst RSE licensees must comply with RSE licensing law at all times, APRA’s view is that the prospect of action against an RSE licensee due to failure to meet the three-day rule during exceptional circumstances (administration peak periods or material ATO superannuation service disruptions) would be remote where the RSE licensee could demonstrate that despite taking every reasonable action non-compliance was unavoidable.
10. Will the publication of the industry level findings from the joint work on trustees' oversight of fees and other charges be deferred?
Yes. Publication of the findings of this work will be deferred for six months.
During 2019, APRA and ASIC required all trustees to review the robustness of their existing governance and assurance arrangements for fees charged to members’ superannuation accounts. APRA and ASIC have since engaged with individual trustees on the outcomes of their reviews, ensuring that trustees have credible plans for addressing identified weaknesses in a timely manner. Given the refocus of both agencies, APRA and ASIC will defer for six months publication of the industry-level findings that was originally scheduled for the first half of 2020.
11. In dealing with payments to members under the release of benefits on compassionate grounds (COVID-19), what are APRA’s expectations of RSE licensees in terms of processing the payments?
SIS Reg 6.17D(3) requires an RSE licensee to pay the benefit to the member as soon as practicable, after having received a copy of a determination from the ATO.
In complying with this requirement, APRA expects that:
- where the RSE licensee’s automated checking has not identified a red flag, payments will generally be made within five business days of receipt of a determination from the ATO; and
- in exceptional circumstances – such as where the RSE licensee’s automated checking has identified a red flag and additional fraud or other verification steps are required, or where the payment is being made from interests held in defined benefit funds – APRA acknowledges that the process for making a payment may take longer. Nonetheless, APRA expects the RSE licensee to make payments as expeditiously as possible in these cases.
APRA acknowledges that these timeframes may extend slightly where an RSE licensee experiences a high volume of applications at any particular time.
APRA notes that such a process differs from the usual process for making payments under existing early release grounds, as the application process has additional security controls, and RSE licensees are exempt from undertaking upfront customer verification in accordance with their anti-money laundering and counter-terrorism financing (AML/CTF) obligations1.
1 AUSTRAC introduced a Rule under the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act), which makes clear that an RSE licensee is not required to carry out its customer verification required under the AML/CTF regime before releasing benefits on COVID-19 compassionate grounds under an ATO determination. AUSTRAC has produced guidance on how other AML/CTF obligations such as ongoing customer due diligence obligations, including customer verification, may apply where a fund assesses that there is a fraud or financial crime risk.
12. In circumstances where RSE licensees follow the approach set out in these FAQs but fraud nonetheless occurs, what is APRA’s position on civil penalty action and trustee liability?
APRA acknowledges that the process for determining and paying amounts under the COVID-19 early release of super measure is different to the usual process for making payments under existing early release grounds. The AML/CTF Rule exempting RSE licensees from undertaking up-front customer verification means that RSE licensees will, in most cases, have less RSE licensee-verified information upon which to form a view about a payment. However, the security controls around the application process and the RSE licensee appropriately acting on red flags identified by their automated checking process will mean that for the majority of applications it will be reasonable for RSE licensees to depart from their usual fraud control measures in order to ensure payments are made to members as soon as practicable.
In circumstances where an RSE licensee is able to satisfactorily demonstrate to APRA that it has followed the approach set out in these FAQs, APRA would be unlikely to take action against an RSE licensee should a fraudulent payment/s occur.
13. Where the ATO revokes a determination, what is APRA’s view on how the payment standards in the SIS Act and Regulations would apply to any payment made by the trustee in relation to that determination?
The ATO is working with individuals where it has established that the individual has made a genuine error in their application. In those cases, the SIS Regulations allow for the determination to be revoked. A significant proportion of those applications have involved the individual selecting the incorrect amount to be released from their super account, for example they might input $10 instead of $10,000.
The individual is often not aware of this error until they receive the application approval correspondence or the actual payment.
To ensure that those individuals who have made a genuine mistake are not disadvantaged and unable to access the early release benefits this measure was designed to provide, the ATO will revoke the first determination and issue a new determination. The new determination will not be for an amount greater than $10,000 when combined with the amount in the first determination. That is, the amount approved in the initial determination that is revoked and then the subsequent determination will not be greater than $10,000.
The ATO will not notify the trustee of any revocation and trustees should continue to make payments in response to any and all determinations received from the ATO, even in circumstances where a second determination for a member is received in respect of the same financial year, and whether or not payment has yet been made in response to the first determination. Where a fund receives a subsequent determination for the same member it will have a unique reference number in the data file.
If a trustee makes a payment on the basis of a determination that is later revoked by the ATO, APRA’s view is that no breach of the payment standards in the SIS Act and Regulations will have occurred. However, where a trustee makes a payment after a determination has already been revoked by the ATO, APRA will not take any regulatory action for any breach of the payment standards in the SIS Act or the SIS Regulations in relation to that payment.
AUSTRAC have also confirmed that where there was a valid determination at the time of payment, the exemption from the requirement for a fund to undertake their customer identification procedure in relation to the applicant continues to apply.