employment law question thanks

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Batman

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#259866 26-Oct-2019 20:35

Hi asking on behalf of someone leaving the country. here goes -

Apparently the current job's contract signed includes employer contribution to superannuation (sounds fine so far)

But if s/he were to leave the job in under 5 years, s/he has to pay back the employer contribution to the superannuation.

Something about "vested after 5 years".

1. Isn't superannuation your money and not employer's money once it's been paid?

2. Assuming this is legal/normal, if you left the job after 4.5 years (approx), should you be allowed to keep 90% (assuming the contract does not say you have to pay it all back)

I know it's all in the wording in the contract (which I'm not privy to) but just brainstorming here ...

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#2343894 26-Oct-2019 20:52

That sounds dodgy as hell for sure

Bung

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#2343913 26-Oct-2019 22:25

Vesting probably applies to contributions in excess of the compulsory minimum. Mentioned on too many Government web sites for it to be that dodgy 😊

Handle9

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#2343984 27-Oct-2019 04:13

Is superannuation KiwiSaver or an employer scheme?

k1wi

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#2343988 27-Oct-2019 07:39

The pension scheme I am in (offshore) requires me to contribute 11% of my salary. If I were to leave before I am vested (5 years) I only get that money when I leave. After I’m vested I qualify for the pension payments schema, which build up non-linearly to 80% of the average of my last three years salary after 35 years service - with fewer years required to get 80% after you hit 65 y/o - once I hit retirement age of 65.

PolicyGuy

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#2343989 27-Oct-2019 07:39

Handle9: Is superannuation KiwiSaver or an employer scheme?

It can't be KiwiSaver, those kinds of rules just don't apply, it must be an employer-specific scheme.
Unless it's insanely generous, a non-KS scheme makes little sense these days, in fact I'm surprised to hear of one still being offered to new employees.

As for 'paying it back', they won't have the money except as a book entry on a super fund statement, as it hasn't vested in the employee yet. Their super fund statement will show separate amounts for employer and employee. If they cash out or leave before the vesting date, they will be entitled only to the employee portion, not the employer portion. So no, they don't pay it back, they just don't get that portion of the money.

The more technically interesting question is what happens to non-vested contributions when the contributor leaves the fund?
Do they get re-distributed as bonus earnings to the remaining fund members, do they go into 'reserves' to be used at the fund manager's discretion, or what? I was once involved in a situation where the employer used theses reserves to pay the employer's contributions one year - this was entirely legal under the fund's Trust Deed, but the employees thought it was a bit poor.

PolicyGuy

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#2343992 27-Oct-2019 07:55

k1wi: The pension scheme I am in (offshore) requires me to contribute 11% of my salary. If I were to leave before I am vested (5 years) I only get that money when I leave. After I’m vested I qualify for the pension payments schema, which build up non-linearly to 80% of the average of my last three years salary after 35 years service - with fewer years required to get 80% after you hit 65 y/o - once I hit retirement age of 65.

This is a "Defined Benefit" scheme, they used to be common with the Government Superannuation Scheme (that's not the "National Super" / "Old Age Pension", it was a contributory scheme for civil servants, teachers, police, firefighters, Hospital Board employees, etc. etc.) being the biggest example. It closed to new members in the late 1980s / early 1990s. If there are any left in NZ, I think they would be only for Air NZ pilots of a certain age. The problem with Defined Benefit schemes is that they are a perpetual promise made on behalf of future shareholders (or taxpayers if government-run): "we will pay you 80% of your salary for ever, even if you live to 104". This can be very difficult to sustain, particularly in a low interest rate environment

Batman

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#2343994 27-Oct-2019 08:10

PolicyGuy:

Handle9: Is superannuation KiwiSaver or an employer scheme?

It can't be KiwiSaver, those kinds of rules just don't apply, it must be an employer-specific scheme.
Unless it's insanely generous, a non-KS scheme makes little sense these days, in fact I'm surprised to hear of one still being offered to new employees.

As for 'paying it back', they won't have the money except as a book entry on a super fund statement, as it hasn't vested in the employee yet. Their super fund statement will show separate amounts for employer and employee. If they cash out or leave before the vesting date, they will be entitled only to the employee portion, not the employer portion. So no, they don't pay it back, they just don't get that portion of the money.

The more technically interesting question is what happens to non-vested contributions when the contributor leaves the fund?
Do they get re-distributed as bonus earnings to the remaining fund members, do they go into 'reserves' to be used at the fund manager's discretion, or what? I was once involved in a situation where the employer used theses reserves to pay the employer's contributions one year - this was entirely legal under the fund's Trust Deed, but the employees thought it was a bit poor.

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TheMantis

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#2344001 27-Oct-2019 09:23

PolicyGuy:

Handle9: Is superannuation KiwiSaver or an employer scheme?

The more technically interesting question is what happens to non-vested contributions when the contributor leaves the fund?
Do they get re-distributed as bonus earnings to the remaining fund members, do they go into 'reserves' to be used at the fund manager's discretion, or what? I was once involved in a situation where the employer used theses reserves to pay the employer's contributions one year - this was entirely legal under the fund's Trust Deed, but the employees thought it was a bit poor.

This sounds similar to the NZDF about 10 years ago. Post GFC the chief of defence (Jerry Mateparae in one of his many less than ethical actions) used the NZDF compulsory super scheme (DFSS, closed to new members in 2008) reserves to pay the employer contribution (approx. $50M) for a least one year (2009, it's in the annual report), perhaps more. Needless to say NZDF DFSS members were very unhappy. It possibly wouldn't have been so bad if he had directed the money that was meant to pay the employer contribution into other personnel related areas like remuneration and/or conditions of service but that didn't happen.

Don't even get me started how, in 2010, the same guy gave NZDF Government Super Fund members (defined benefit and a vastly better scheme) a free handout for at least six months while the rest of us (the vast majority) lost money hand over fist in our defined contribution scheme.

Anyway; vesting of employer contributions is perfectly legal and any contributions not fully vested will simply be withheld when leaving the super scheme.

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#2344008 27-Oct-2019 09:44

TheMantis:

PolicyGuy:

Handle9: Is superannuation KiwiSaver or an employer scheme?

The more technically interesting question is what happens to non-vested contributions when the contributor leaves the fund?
Do they get re-distributed as bonus earnings to the remaining fund members, do they go into 'reserves' to be used at the fund manager's discretion, or what? I was once involved in a situation where the employer used theses reserves to pay the employer's contributions one year - this was entirely legal under the fund's Trust Deed, but the employees thought it was a bit poor.

This sounds similar to the NZDF about 10 years ago. Post GFC the chief of defence (Jerry Mateparae in one of his many less than ethical actions) used the NZDF compulsory super scheme (DFSS, closed to new members in 2008) reserves to pay the employer contribution (approx. $50M) for a least one year (2009, it's in the annual report), perhaps more. Needless to say NZDF DFSS members were very unhappy. It possibly wouldn't have been so bad if he had directed the money that was meant to pay the employer contribution into other personnel related areas like remuneration and/or conditions of service but that didn't happen.

Don't even get me started how, in 2010, the same guy gave NZDF Government Super Fund members (defined benefit and a vastly better scheme) a free handout for at least six months while the rest of us (the vast majority) lost money hand over fist in our defined contribution scheme.

Anyway; vesting of employer contributions is perfectly legal and any contributions not fully vested will simply be withheld when leaving the super scheme.

Thanks. Any rules on how much is withheld eg pro rated to length of service? I'm guessing the answer lies in the exact wording but I'm told there is no details on this on the contract.

TheMantis

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#2344009 27-Oct-2019 09:48

Batman:

Thanks. Any rules on how much is withheld eg pro rated to length of service? I'm guessing the answer lies in the exact wording but I'm told there is no details on this on the contract.

It would be entirely dependant on the trust deed for the super scheme. I wouldn't expect much, if any, detailed information on this in an employment contract.