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127 q Annual Report 2013-2014 HORSHAM RURAL CITY COUNCIL


NOTES TO THE FINANCIAL STATEMENTS (Cont.) FOR THE YEAR ENDED 30th JUNE, 2014


32 . SUPERANNUATION (cont.)


Funding Arrangements Council makes employer contributions to the defined benefits category of the Fund at rates determined by the Trustee on the advice of the Fund's actuary. The Fund's employer funding arrangements comprise of three components (which are detailed below) are: 1. Regular contributions - which are ongoing contributions needed to fund the balance of benefits for current members and pensioners. 2. Funding calls - which are contributions in respect of each participating employer's share of any funding shortfalls arise; and 3. Retrenchment increments - which are additional contributions to cover the increase in liability arising from retrenchments.


Horsham Rural City Council is also required to make additional contributions to cover the contribution tax payable on the contributions referred to above.


Employees are also required to make member contributions to the Fund. As such, assets accumulate in the Fund to meet member benefits, as defined in the Trust Deed, as they accrue.


Employer Contributions


Regular contributions On the basis of the results of the most recent full actuarial investigation conducted by the Fund's actuary as at 31 December 2011, Council makes employer contributions to the Fund's Defined Benefit category at rates determined by the Fund's Trustee. For the year ended 30 June 2014, this rate was 9.25% of members' salaries. This rate increased to 9.5% on 1 July 2014 and is expected to increase in line with the required Superannuation Guarantee contribution rate.


In addition, Council reimburses the Fund to cover the excess of the benefits paid as a consequence of retrenchment above the funded resignation or retirement benefit (the funded resignation or retirement benefit is calculated as the VBI multiplied by the benefit).


Funding Calls The Fund is required to comply with the superannuation prudential standards. Under the superannuation prudential standards SPS 160, the Fund is required to target full funding of its vested benefits. There may be circumstances where: • a fund is in an unsatisfactory financial position at an actuarial investigation (i.e. its vested benefit index (VBI) is less than 100% at the date of the actuarial investigation; or • a fund's VBI is below its shortfall limit at an time other than at the date of the actuarial investigations.


If either of the above occur, the fund has a shortfall for the purposes of SPS 160 and fund is required to put a plan in place so that the shortfall is fully funded within three years of the shortfall occurring. There may be circumstances where the Australian Prudential Regulation Authority (APRA) may approve a period longer than three years.


The Fund monitors its VBI on a quarterly basis and the Fund has set its shortfall limit at 97%.


In the event that the Fund Actuary determines that there is a shortfall based on the above requirement, the Fund's participating employers (including Horsham Rural City Council) are required to make an employer contribution to cover the shortfall. The methodology used to allocate the shortfall was agreed to 1997 to fairly and reasonably apportion the shortfall between the participating employers.


Using the agreed methodology, the shortfall amount is apportioned between the participating employers based on the pre-1 July1993 and post-30 June 1993 service liabilities of the Fund's defined benefit category, together with the employer's payroll at 30 June 1993 and at the date of the shortfall has been calculated.


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