News

D&D Options – SASS members

April 29, 2003

Whilst participation in the new D&D arrangements will be compulsory for permanent members in SASS without Additional Benefit Cover (ABC), those SASS members who do have ABC will soon be given a one-off choice of one of following options:

1. Full D&D and no ABC
Opt out of ABC in favour of the full range of Death, TPI and PPI benefits under the new D&D Award. Members who take this option will pay 1.5% of salary for D&D and will cease paying for ABC;
2. Part D&D and part ABC
Stay with ABC for Death and TPI cover and be covered by the PPI benefits (only) under the new D&D Award. Members who take this option will pay 0.5% of salary for D&D and will continue paying for ABC;
3. ABC only with no D&D
Stay with ABC and opt out of the new D&D Award. These members will not pay for D&D but will continue paying for ABC.

To help you better understand these options, the Union has prepared the following overview. Whilst all care has been taken in the preparation of this information, the Union cannot accept responsibility for its accuracy and members are advised to make your own investigations. The Union’s officials remain available to answer member queries, but we cannot give you any advice about your best option other than to recommend that you seek independent financial advice if you remain unsure.

Please note that this information does not take into account any tax treatment for any of these benefits, largely because of the complexity involved. It is impossible to provide broadly applicable “cash in hand” examples because the level of taxation of lump sum payments is in many instances determined by your age, your length of service and your level of disability. All of the benefits – both ABC and D&D – are therefore shown in gross (pre-tax) figures. Further, the tax treatment of some of the D&D Award’s benefits are presently the subject of a tax ruling from the ATO, so nett D&D outcomes cannot be confirmed until that ruling has been received.

SASS and D&D

Clause 6 of the D&D Award provides that its lump sum benefits are “in addition to those benefits otherwise payable under the FSS Scheme, the SASS scheme and/or the Workers Compensation Act”. This means that you will still qualify for exactly the same standard benefit from SASS in the event of Death or medical retirement, regardless of whichever of the three options you chose – full D&D and no ABC, part D&D and part ABC, or ABC only with no D&D.

The single exception to this “additional to” rule is if you are killed or rendered TPI on-duty and you’d taken the full D&D and no ABC option. In this case (only) you would be required to surrender the employer-financed part of your SASS account in return for the lifetime SSS-style pension. You (or your estate) would still receive the balance of your own contributions to SASS, plus interest, though.

(Note: A table which broadly mapped out the difference between your three options was inserted here in the hard-copy version of this notice faxed to all permanent members’ workplaces today.)

 

SASS Additional Benefit Cover

As can be seen above, the Additional Benefit Cover (ABC) affects only the Death and TPI exit benefits in SASS. For example, if you exit SASS for any reason other than Death or Total and Permanent Invalidity (TPI) then you will receive the same exit benefit from SASS regardless of whether you had ABC or not. This overview therefore concentrates on the Death and TPI benefits under the ABC in SASS – not the standard SASS benefit which every member would receive.

Unlike the D&D Award, the Death and TPI benefits under ABC are identical. The ABC in SASS is also different to the D&D Award’s benefits in that ABC makes no distinction between on-duty and off-duty deaths or injuries.

For each 1% of salary contributed to SASS, members accrue 1 benefit point up to a maximum of 6 benefit points (ie, 6% of salary) per year. The actual “additional benefit” from ABC can best be described as 4% of final salary per prospective benefit point. Prospective benefit points are the benefit points the SASS member was expected to accrue between the time of their death or TPI retirement and their minimum retirement age (which is either 58 or 55 – see below*). This calculation is based on your average rate of benefit point accrual (ie your contribution rate) during membership, so if you’re averaging less than 6% your ABC benefit will be lower.

Calculating your (pre-tax) ABC lump sum benefit is a relatively straightforward process. To do this you need to know three things:
1. your current superable salary,
2. your rate of contribution (this, for most members, would be 6%), and
3. years to go until you reach minimum age retirement at 58 (or 55 if pre 1/4/88*).

(* Members who joined SASS before 1/4/88 have a minimum retirement age of 55. Members in this earlier group can retire and access their full retirement benefits 3 years earlier, but the downside is that their ABC is lower and will cut out altogether 3 years earlier too.)

Taking the example of a member with ABC who joined SASS in 1990 (ie, post 1/4/88), who is earning $48,000 per year, who is contributing at a full 6% and who is 40 years old, the ABC benefit would be calculated as follows:

18 years of prospective service x 6 benefit points per year x 4% of $48,000
(18 x 6 x 0.04 = 4.32 x $48,000 = $207,360)
Additional Benefit Cover = $207,360

However, if the same firefighter was age 50 (not 40) then his/her ABC benefit would be reduced as follows:
8 years of prospective service x 6 benefit points per year x 4% of $48,000
(8 x 6 x 0.04 = 1.92 x $48,000 = $92,160)
Additional Benefit Cover = $92,160

It can be seen from the above examples that the benefit of ABC reduces with age, eventually reaching zero once a SASS member turns 58 (or 55, if pre 1/4/88).

SASS PPI cover

As discussed above, there is no benefit from ABC for Partial and Permanent Invalidity (PPI) – the PPI benefit under SASS is exactly the same regardless of whether you have ABC or not.

It is also important to remember that commonwealth superannuation preservation laws mean that much of any PPI benefit under SASS will need to be preserved until you reach age retirement. In most cases this will mean that even if you’re medically retired PPI at (say) age 40, then you won’t be able to access any of the preserved component of your SASS PPI benefit – a component that has continued to grow with time – for (at least) another 18 years.

As a general rule, Death and TPI superannuation benefits are not subject to commonwealth preservation laws, but all other super benefits are. The D&D Award was deliberately negotiated to overcome this problem. Whilst the Death and TPI benefits will be paid from a D&D Superannuation Fund, the PPI benefits will be paid outside of superannuation as a lump sum directly from the employer. It follows that because the D&D Award’s PPI lump sums are not superannuation benefits, they will not be subject to those preservation laws and will therefore be able to be accessed by members immediately.

D&D Award Benefits

The first major difference between the D&D Award and the SASS ABC is that the D&D Award provides different benefits depending on whether the Death or injury occurred on-duty (including as a result of your firefighting duties), or off-duty. A further difference is that the D&D Award pays different levels of benefit for on-duty deaths versus on-duty TPI retirements. However, the lump sum benefits for off-duty death or TPI retirements are (like the ABC in SASS) identical.

Another major difference is that whilst the ABC is dependant upon your age at the time of Death or Total and Permanent Incapacity, and ceases altogether by age 58, the D&D Award’s pensions are not. Further, the D&D Award’s off-duty lump sum payments for Death or Total and Permanent Incapacity do not begin to reduce until age 61, and do not cease until age 65.

On-Duty Death and TPI

In the case of Death or Total and Permanent Incapacity (TPI) at (or arising from) work, the D&D Award will see lifetime pensions paid which will be identical in every way to those currently payable to SSS members. This will include extra childrens pensions (if applicable) and reversionary pensions for the spouses of former firefighters who die whilst in receipt of a TPI pension.

It’s again a relatively straightforward process to calculate your pension entitlements using the pension formula under the D&D Award. The simplified version of the current pension formula is:

Pension = {S/260 + 22.38} x $5.50
(S = your salary on the last day of service with the NSWFB)

Using our previous example of the permanent member earning $48,000 per year, his/her TPI pension would therefore be:

{$48,000/260 + 22.38} x $5.50 = $1,138.50 per fortnight

The Death pension (which is payable to a surviving spouse upon the on-duty death of a serving firefighter, or upon the death of a TPI pensioner) is 2/3rds of the TPI pension, which in the above example would be:

$1,138.50 x (2/3) = $759.00 per fortnight

Off-Duty Death and TPI

In the case of Death or Total and Permanent Incapacity (TPI) off-duty, the D&D Award will see a flat lump sum benefit of $250,000 paid up to and including age 60. Between age 61 and 64 the off-duty lump sum benefit reduces by $50,000 per year (eg, it’s $150,000 at age 62) until it ceases at age 65. This D&D lump sum would be in addition to the standard Death/TPI benefit payable under SASS.

On-Duty PPI

In the case of Partial and Permanent Incapacity (PPI) at (or arising from) work, the D&D Award will see a lump sum benefit paid to members who cannot be successfully redeployed to alternative duties within the Brigades according to an age-related scale. That scale can be found in full at the end of the D&D Award, but for simplicity’s sake here it begins at 8.33 x your salary at age 20 and reduces down to $0 at age 60.

Using our example of a 40 year old member earning $48,000 per year, his/her on-duty PPI exit benefit would be 5.36 x $48,000, or a lump sum of $257,280. This D&D lump sum would be in addition to the PPI benefit payable under SASS.

Off-Duty PPI

In the case of Partial and Permanent Incapacity (PPI) off-duty, the D&D Award will see a lump sum benefit of up to 2 years salary, or salary to age 60 (whichever is the lesser) paid to members who cannot be successfully redeployed to alternative duties within the Brigades. Our $48,000 pa member would therefore receive a maximum off-duty PPI exit benefit of 2 x $48,000, or a lump sum of $96,000. This D&D lump sum would be in addition to the PPI benefit payable under SASS.

(Note: A comparative table between the SASS ABC benefit (only) and the D&D Award’s benefits at ages 40, 50 and 60 was inserted here in the hard-copy version of this notice faxed to all permanent members’ workplaces today.)

Chris Read,
State Secretary