Superannuation (CSS) Assets Transfer Determination (No. 9)

CSS Fund - The superannuation fund established under the Superannuation Act 1976 for Commonwealth employees who were members of the Commonwealth Superannuation Scheme (CSS). The fund holds contributions from members and the Commonwealth, plus investment earnings, to pay defined benefits.

PSS Fund - The fund established under the Superannuation Act 1990 for the Public Sector Superannuation Scheme, a later defined benefit scheme for Australian Government employees. The PSS replaced the CSS for new members from 1 July 1990.

Transfer day - 31 March 2006. This is the date as at which the assets of the CSS Fund are valued and taken to be transferred. The transfer is deemed to have occurred on this day, even though the determination is made later.

Exit day - For each transferee, the day before they became a member of the PSS. For example, if a person joined the PSS on 24 July 2002, their exit day is 23 July 2002 (item 1). This marks the cessation of CSS membership and the start of PSS membership.

Relevant day - 30 June in the financial year immediately before the exercise of a transfer election. The schedule shows relevant dates ranging from 30 June 2002 to 30 June 2004, depending on when the transfer election was exercised. This is the baseline date for valuing accumulated contributions and employer contributions.

Transferee - A person who was a CSS member and then became a PSS member in the period 1 July 2002 to 30 June 2005, and who is covered by section 245 of the Superannuation Act 1976. The determination applies only to those 19 individuals listed in the schedule.

Formula components - A, B, C, and D. A represents the accumulated share of CSS Fund assets at the relevant date, grown by the fund rate of return to the exit day. B and C represent contributions made between 1 July and the exit day, plus notional interest. D applies the fund rate of return from exit day to transfer day to the total of A+B+C. The product is the transfer amount.

Fairly and equitably represent as nearly as is practicable - This phrase in clause 4 qualifies the transfer. It acknowledges that the formula may not achieve perfect precision, but the transferred assets must approximate the liability for the transferees. The formula is the mechanism for achieving that approximation.

Share of CSS Fund assets - In component F of A, this refers to the proportion of the CSS Fund’s net assets (after deducting all known liabilities) that is attributable to the number of transferees specified in column 5 of the schedule. This is not a per-member account balance but a fund-level allocation.

Rate of return of the CSS Fund - Not defined further in the determination, but must be the actual investment return earned by the CSS Fund over the relevant periods. The CSS Board would have determined this based on fund accounting data.

The determination directly affects three groups: the CSS Board, the PSS Board, and the 19 transferees identified in the schedule.

The CSS Board (the trustee of the CSS Fund) is the party that makes the determination and effectuates the asset transfer. Under section 248(1) of the Superannuation Act 1976, the Board has the power to transfer assets from the CSS Fund to other Commonwealth superannuation schemes. This determination is an exercise of that power. The Board must ensure the formula is correctly applied and that the assets are recorded as transferred.

The PSS Board (the trustee of the PSS Fund) receives the assets on behalf of the PSS Fund. The transferred assets become part of the PSS Fund’s pool, backing the benefits of the transferees and potentially other PSS members. The PSS Board must accept the transfer and update its records accordingly. There is no discretion to reject the transfer if the determination is valid.

The 19 transferees are the individuals whose accrued benefits in the CSS are being replaced by an equivalent asset backing in the PSS. They are not required to take any action. However, the adequacy of the transfer amount directly affects the value of their benefits in the PSS. If the transferred assets are insufficient to cover the liability for their future benefits, the PSS Fund (and ultimately the Commonwealth as employer) must make up the shortfall. Conversely, if the transfer is overly generous, it subsidises the transferees at the expense of remaining CSS members.

Other CSS members (those who did not transfer to the PSS) are indirectly affected because the CSS Fund’s assets are reduced by the transferred amount. The determination removes from the CSS Fund the assets that fairly and equitably represent the liability for the transferees. This reduces the pooled assets supporting remaining members’ benefits. If the transfer amount is too high, remaining members are worse off; if too low, transferees are worse off. The “fairly and equitably represent” standard is intended to avoid such cross-subsidy.

Other PSS members (who were not transferees from CSS) are also indirectly affected because the transferred assets increase the PSS Fund’s pool. However, because the transferred amount should correspond to the liability for the transferees, the net effect on other PSS members’ benefits should be neutral, provided the actuarial valuation treats the transferred assets as part of the fund.

Administrators and actuaries of both schemes must adjust their systems and valuation assumptions to reflect the transfer. For the CSS Fund, the reduction in assets and liabilities must be recorded as at 31 March 2006. For the PSS Fund, the increase in assets and the corresponding liability for transferee benefits must be recorded. This may require adjustments to member account records and actuarial reports.

The Australian Government as employer is the ultimate source of both funds’ assets and liabilities. The transfer does not change the Government’s overall obligation, but it does shift the liability from the CSS Fund to the PSS Fund. The Government must ensure that both funds are adequately funded after the transfer.

The determination itself does not create new duties or rights beyond those already existing under the Superannuation Act 1976. It is a mechanical step to implement a statutory transfer.

Duty of the CSS Board: Under section 248(1), the CSS Board may determine that assets of the CSS Fund be transferred to the PSS Fund. This determination is the exercise of that power. The Board must ensure the transferred assets fairly and equitably represent the liability for the transferees. Clause 4 imposes that standard. The Board must calculate the transfer amounts correctly using the formula in clause 5, including determining the rate of return of the CSS Fund for the relevant periods. The Board must also affix its common seal in accordance with its internal procedures, as shown on the determination.

Duty of the PSS Board: While not explicitly stated in this determination, the PSS Board has a duty under the Superannuation Act 1990 to accept the transferred assets and hold them for the benefit of PSS members, including the transferees. The determination does not give the PSS Board any power to reject the transfer.

Duty of administrators: The CSS Fund administrators must ensure that the transfer amounts are calculated and recorded. The PSS Fund administrators must update member records to show that the transferees’ benefits are now backed by assets in the PSS Fund.

Rights of transferees: The transferees have a right to have their accrued benefits in the CSS recognised and transferred to the PSS. This right arises from the Superannuation Act 1976 and the Superannuation Act 1990, not from this determination. However, the determination is the mechanism by which the asset backing for those benefits is moved. If the transfer amount is incorrectly calculated, a transferee may have a right to seek correction, but the determination does not specify a dispute resolution process. The right is derivative of the overarching statutory framework.

Rights of other CSS and PSS members: Other CSS members have a right to have the CSS Fund’s assets managed in their best interests, which includes ensuring transfers are fair and equitable. Other PSS members have a right to have the PSS Fund’s assets managed for their benefit. The determination does not give them any direct say in the transfer.

No new rights created: The determination does not confer any new benefit or entitlement on any person. It is purely a transfer of existing assets between two funds. It does not alter the rules of either scheme, contribution rates, or benefit definitions.

This determination is a legislative instrument made under the Superannuation Act 1976. It does not itself create any offences, penalties, or enforcement mechanisms. Compliance is ensured through the governance structures of the CSS and PSS funds, oversight by the Australian Prudential Regulation Authority (APRA) for superannuation, and ultimately the Commonwealth Ombudsman or courts.

Non-compliance by the CSS Board: If the CSS Board fails to transfer the assets in accordance with the determination, it would be in breach of its fiduciary duties under the Superannuation Act 1976. The Commonwealth could direct the Board to comply. Members could potentially seek judicial review of the Board’s actions as a Commonwealth decision-maker.

Error in calculation: If the formula is applied incorrectly (e.g., wrong rate of return, misreading of schedule values), the transfer amounts could be wrong. Affected transferees could challenge the determination as ultra vires or seek correction. The Administrative Appeals Tribunal may have jurisdiction to review a decision to transfer assets if it is a reviewable decision under the Act. However, the determination itself may not be a reviewable decision; it is a legislative instrument.

Failure to record the transfer: If the CSS Fund administrators do not record the transfer in the fund accounts, the assets would remain notionally in the CSS Fund, creating a discrepancy between assets and liabilities. This could be detected in the annual audit of the CSS Fund. The Auditor-General would report any non-compliance.

No specific penalties: The determination contains no penalty provisions. Enforcement relies on the broader legal framework: the Superannuation Act 1976, the Public Governance, Performance and Accountability Act 2013 (PGPA Act) for Commonwealth entities, and the general law of trusts for superannuation funds.

Risk of challenge: The use of a formula with undefined rates of return (“r”, “r*”) could be a source of dispute if those rates are not calculated or documented properly. If a transferee believes the rate used was inaccurate, they could seek information from the CSS Board and potentially challenge the transfer. However, as a one-off determination for 19 people, the practical likelihood of enforcement action is low. The determination is spent once executed.

The determination is made under subsection 248(1) of the Superannuation Act 1976. That section empowers the CSS Board to determine that assets of the CSS Fund be transferred to another fund established under a Commonwealth superannuation scheme. The PSS Fund is established under the Superannuation Act 1990, so the transfer is within that statutory framework.

Superannuation Act 1976: This is the parent Act. Section 245 defines the class of persons who may transfer from CSS to PSS. Section 248(1) provides the asset transfer power. The determination must be consistent with the Act. The formula in clause 5 does not conflict with any provision of the Act, as far as the source shows.

Superannuation Act 1990: The PSS Fund is governed by this Act. The determination does not amend that Act but provides for the receipt of assets. The PSS Board must hold the transferred assets subject to the rules of that scheme.

Public Governance, Performance and Accountability Act 2013 (PGPA Act): The CSS Fund and PSS Fund are Commonwealth entities or bodies subject to the PGPA Act. The transfer of assets must comply with PGPA requirements for proper use and management of public resources. The determination does not override those obligations.

Superannuation Industry (Supervision) Act 1993 (SIS Act): Both funds are exempt public sector superannuation schemes under the SIS Act, so the SIS Act does not directly apply. However, the determination’s formula and fairness standard may be informed by general superannuation law principles of equitable treatment and preservation of accrued benefits.

Income Tax Assessment Act 1997: Rollovers between CSS and PSS are generally tax-free. The determination does not address tax, but the transfer likely does not trigger a taxing point.

Other similar determinations: This is Determination No. 9, indicating a series of such transfers. Each determination covers a specific cohort of transferees. The formula and schedule structure may vary across determinations. The interaction between determinations is that each stands alone.

No repeal or amendment of other laws: The determination does not repeal or amend any Act. It has effect only for the purpose of transferring assets. It does not affect the rights of any person under other laws, such as family law or bankruptcy law, regarding superannuation interests.

This determination is a standalone legislative instrument. It was made on 8 March 2006 by resolution of the CSS Board, and the seal was affixed in the presence of the Chairman and a Board member. The determination commences when it is made (clause 2). There is no indication of any subsequent amendments. The source document is the original as made.

Because the determination is a one-off transfer, it is spent once the transfer is effectuated. There would be no need for amendment. The schedule lists specific transferees and values; any change would require a new determination. The determination may have been tabled in Parliament as a legislative instrument under the Legislation Act 2003, but no amendment history is visible from the source.

The series number “No. 9” implies there were at least eight earlier determinations of the same kind for earlier transfer cohorts. Each would have its own commencement date and schedule. The cumulative effect is that multiple groups of CSS to PSS transferees have had their asset backing moved in tranches.

The source does not reference any litigation. However, it is possible that challenges to similar determinations or to the overall CSS to PSS transfer regime have occurred. Without source, I cannot name specific cases. However, one can infer potential litigation risks: a transferee might argue that the formula does not fairly and equitably represent the liability because the rate of return used was inappropriate, or because the schedule values were erroneous. Any such challenge would likely be through the Administrative Appeals Tribunal or the Federal Court under the Administrative Decisions (Judicial Review) Act 1977.

The use of a formula with undefined “rate of return of the CSS Fund” could be a point of contention. If the CSS Board applied a rate that differs from the actual fund return, a member could claim the transfer amount is incorrect. The determination does not specify how the rate is calculated (e.g., whether it is net of fees, gross, annualised, or simple). Litigation might also arise if the transfer day or the relevant day is disputed, though those are fixed.

Because the determination is a legislative instrument, it may be subject to disallowance by Parliament, but that is not litigation. No known court decisions involving this specific determination are cited in the source.

Undefined rate of return: The formula uses “rate of return of the CSS Fund” for two periods, but the determination does not define how that rate is calculated. Is it the investment return net of fees? Is it a time-weighted or dollar-weighted return? Is it audited? The CSS Board must determine this, but the transferee has no way to verify it from the instrument. This creates an accountability gap.

“Fairly and equitably” as a standard: Clause 4 requires that transferred assets “fairly and equitably represent as nearly as is practicable the sum of the transfer amounts.” This is a judgement standard. The formula is the mechanism for achieving that, but the clause does not guarantee that the actual liability equals the transferred assets. There is a risk that the transfer is too high or too low, but the standard protects the Board if the formula was applied in good faith.

Small cohort, large sums: The schedule shows 19 transferees, but the values in column 5 range from $18,143 to $194,307. Total column 5 is around $1.6 million, and column 6 adds about $30,000. After compounding with rates of return, the total transfer amount could be significantly higher. The small number of affected individuals means the determination is narrow, but the per-person amounts are substantial.

No indexation or update: The schedule values are fixed as at the relevant dates. The formula applies rates of return, but those returns are not guaranteed to match market movements exactly. If the CSS Fund had a negative return in a period, the transfer amount could be lower than the original contributions. The determination does not guarantee a minimum transfer.

Deemed transfer: Clause 4 says assets “are taken to have been transferred” on the transfer day. This is a deeming provision. It does not require a physical transfer of cash or shares; it means the legal ownership of those assets passes by force of the determination. This could cause accounting and prudential issues if the actual assets are not liquid or if the transfer day value differs from the deemed value.

No review mechanism: The determination does not provide for internal review or appeal. A transferee who believes the transfer amount is wrong has no path within the determination itself. They would need to rely on general administrative law.

Potential for double counting: The formula includes component B (contributions from 1 July to exit day) and component C (interest on those contributions). But the exit day for some transferees is very close to 1 July (e.g., items 1-6 have exit days in July to December 2002). The period is short, so the interest component is small. For others (e.g., item 19, exit day 7 March 2005, relevant day 30 June 2004), the interest period is longer. The formula may undercount contributions for those with mid-year transfers if the relevant day is 30 June of the prior year.

Schedule discrepancies: Column 6 shows $0 for items 13, 16, 17. This means no contributions were made between 1 July and the exit day for those transferees. That could be because they had no employer contributions or member contributions in that period (perhaps they were on unpaid leave or their exit day was 1 July). The formula treats zero contributions correctly.

Compliance with this determination is primarily the responsibility of the CSS Board and its administrators. The steps are:

1. Verify the schedule: Ensure that the 19 transferees listed in the schedule are correctly identified, with accurate exit dates, relevant dates, and contribution values. Any error in the schedule would lead to an incorrect transfer amount. The determination does not provide a correction mechanism, so the schedule must be correct as made.

2. Determine the CSS Fund rate of return: For each transferee, calculate the rate of return for two periods: from relevant day to exit day (for components A and C), and from exit day to transfer day (for component D). The rate must be the actual investment return of the CSS Fund for those periods. The Board must define the methodology (e.g., using the fund’s unit price or portfolio return). If the periods overlap for different transferees, the same rate should apply consistently.

3. Calculate the transfer amount for each transferee: Apply the formula ((A+B+C) x D) using the rates determined. A requires computing F, the share of CSS Fund assets at the relevant day attributable to the number of transferees in column 5. Note that column 5 in the schedule shows the number of transferees is always 1 for each item, so F is simply the total net assets of the CSS Fund at the relevant day multiplied by the proportion that the column 5 value bears to the total CSS Fund liabilities attributable to all members. The wording “share of CSS Fund assets as at the end of the relevant day that represented, after deduction of all known liabilities, the amounts specified in Column 5” suggests that F is the fund asset backing for the column 5 value. This is complex: the CSS Board must identify what portion of the fund’s net assets corresponds to those specific accumulated contributions.

4. Sum the transfer amounts: Sum the individual transfer amounts for all 19 transferees to get the total transfer amount.

5. Identify assets to transfer: Determine which assets of the CSS Fund (cash, bonds, equities, etc.) will be transferred to the PSS Fund. The determination does not specify in-kind transfer; it says assets “are taken to have been transferred”. The Board may need to sell assets or assign ownership. The total value must equal the total transfer amount, and must fairly and equitably represent that sum. In practice, the Board may transfer a cash amount equal to the transfer amount, or a portfolio of assets with equivalent value.

6. Record the transfer as at transfer day: The transfer is deemed to occur on 31 March 2006. The CSS Fund’s books must reflect the reduction in assets, and the PSS Fund’s books must reflect the increase. The determination itself is the legal authority. No further member consent is needed.

7. Inform the PSS Board: The CSS Board should communicate the transfer amounts and list of affected transferees to the PSS Board so that member records can be updated.

8. Audit and documentation: Both boards should document the calculations, rates used, assets transferred, and any assumptions made. The Auditor-General may examine the transfer to ensure it is fair and equitable and in accordance with the determination.

For the PSS Board, compliance involves accepting the assets and updating member records. The PSS Board should verify that the transferred amount is consistent with the determination. If there is a discrepancy, the PSS Board should raise it with the CSS Board.

For transferees, no action is required. They may wish to check their PSS benefit statements to confirm that their accrued benefits are properly recorded. If they believe the transfer amount is incorrect, they should contact the PSS Board or the CSS Board.

For other stakeholders (e.g., the Department of Finance, actuaries), compliance means ensuring that the transfer is reflected in the financial statements and actuarial valuations of both funds. The transfer should not affect the ongoing funding arrangements; the liability for transferee benefits is now in the PSS Fund.

In summary, compliance is predominantly an administrative exercise for the CSS and PSS Boards. The determination provides the legal authority; the practical challenge is correct application of the formula, especially determining the rate of return and the share of fund assets.