Certain super fund members who have ‘inactive’ super accounts with insurance have until 1st July to respond to trustees to “opt in” to retain their insurance. Affected clients will have recently received letters or emails from trustees outlining the opt-in process.
What is an ‘inactive’ account and potential consequences of extended ‘inactivity’?
An account is considered ‘inactive’ where it has not received ‘an amount’. ‘An amount’ generally means a contribution or rollover.
New legislation passed by the Government dictates that a member’s insurance must be cancelled by the trustee after 16 months of continuous inactivity.
Will all fund trustees be sending notifications?
No. Some trustees of stand-alone insurance super funds have taken the view that their policy holders will not reach 16 months of continuous inactivity. Additionally, SMSFs, Small APRA funds, defined benefit members and members of the Australian Defence Force Fund are exempt from this measure.
Clients who became inactive prior to or shortly after 1 March 2018
For any clients who became inactive prior to or shortly after 1 March 2018, they risk their insurance being cancelled on 1 July 2019 or shortly after, depending on when their last contribution or rollover was made.
While in the future, opt-in notifications will be sent at 9, 12 and 15 months of inactivity (assuming no response or activity), clients in this initial phase may only receive one notification.
When should clients send the opt-in response if they wish to retain their insurance?
Clients should respond prior to 16 months of continuous inactivity elapsing. For clients inactive since 1 March 2018 or earlier, a response must be received by Friday 28 June 2019.
We are, however, aware of trustees requesting a response prior to 16 months of inactivity to allow time for processing the response – for example, two weeks.
After a client opts-in
Where a member opts to retain their insurance, they will not be required to opt-in again in the future. By contrast, contributing an amount to an account only restarts the 16 month period. However, following the opt-in, the member will receive a reminder from the trustee every 15 months if their account remains inactive that they may voluntarily elect to cancel their insurance if they wish.
What if a policy is cancelled?
Where a client’s retail policy is cancelled, it may be possible to re-instate the policy without underwriting within a certain period, such as 60 or 90 days. Generally, the insurer will require all missed premiums be paid up. It is important to check with each individual trustee’s insurer to understand whether this is possible, and to understand specific processes and requirements.
If you are still unsure please contact Accountplan’s specialist in superannuation, Dion Richardson, by calling 07 3883 8999