The City of Melbourne makes employer superannuation contributions in respect of its employees to the Local Authorities Superannuation Fund (the Fund). Obligations for contributions are recognised as an expense in profit or loss when they are due.
The Fund has two categories of membership, accumlation and defined benefit, each of which is funded differently.
The Fund's accumulation category, Vision Super Saver, receives both employer and employee contributions on a progressive basis. Employer contributions are normally based on a fixed percentage of employee earnings (9% required under the Superannuation Guarantee Legislation). No further liability accrues to the employer as the superannuation benefits accruing to employees are represented by their share of the net assets of the Fund.
Defined Benefits Plan
The Fund's Defined Benefit Plan is a multi-employer sponsored plan. As the Plan's assets and liabilities are pooled and are not allocated by employer, the Actuary is unable to reliably allocate benefit liabilities, assets and costs between employers. As provided under Paragraph 32 (b) of AASB 119, City of Melbourne does not use defined benefit accounting for these contributions.
City of Melbourne makes employer contributions to the defined benefit category of the Fund at rates determined by the Trustee on the advice of the Fund's Actuary. On the basis of the results of the most recent full actuarial investigation conducted by the Fund's actuary as at 31 December 2008, City of Melbourne makes the following contributions:
9.25% of members' salaries (same as previous year);
the difference between resignation and retrenchment benefits paid to any retrenched employees plus contributions tax (same as previous year).
The actuarial investigation concluded that although the Net Market Value of Assets was in excess of Accrued Benefits at 31 December 2008, based on the assumptions adopted, there was a shortfull of $71 million when the funding of future benefits was also considered. The Actuary will undertake the next actuarial investigation at 30 June 2010 at ascertain if additional contributions are required.
Accounting Standard Disclosure The Fund's liability for accrued benefits was determined the Actuary at 31 December 2008 pursuant to the requirements of Australian Accounting Standard AAS25 as follows:
31 December 2008
$'000
Net Market Value of Assets
3,630,432
Accrued Benefits (per accounting standards)
3,616,422
Difference between Assets and Accrued Benefits
14,010
Vested Benefits
3,561,588
The financial assumptions used to calculate the Accrued Benefits for the defined benefit category of the Fund were:
Net Investment Return
8.50% p.a
Salary Inflation
4.25% p.a
Price Inflation
2.75% p.a
City of Melbourne Superannuation Sub Plan (CMSSP) Members
A separate plan is operated for City of Melbourne defined benefit members. The CMSSP was closed to new members on 23 December 1993.
The CMSSP is a multi-employer sponsored plan. As the fund's assets and liabilities are pooled and are not allocated by employer, the Actuary is unable to reliably allocate benefit liabilities, assets and costs between employers. As provided under Paragraph 32 (b) of AASB 119, council does not use the defined benefit accounting for these contributions, but as the majority of the members of the fund are employees of the Melbourne City Council group, the surplus or deficit of the fund is recorded in accordance to AASB119 at the consolidated level for reporting purposes. Member profiles will be reviewed periodically to determine if and when reporting at the individual entity level became appropriate.
The Melbourne City Council makes employer contributions to the defined benefits category of the fund at rates determined by the fund's trustee on advice of the actuary. On the basis of the results of the most recent update of the full actuarial investigation conducted by the fund's actuary as at 31 December 2008, the trustee has determined that the funding arrangements were adequate for the expected CMSSP liabilities and Melbourne City Council makes the following contributions:
8 per cent of members' salaries (up until 30 November 2006), and 4 per cent thereafter
the difference between resignation and retrenchment benefits paid to its retrenched employees (same as previous year).
The actuarial investigation concluded that although the Net Market Value of Assets was in excess of Accrued Benefits at 31 December 2008, based on the assumptions adopted, there was a shortfall for when the funding of future benefits was also considered. A Liability of $10.354 million has been recognised in the consolidated financial statements as the council's share of the scheme's liabilities, being the difference between the present value of employees' accrued benefits and the net market value of the scheme's assets at balance date. The actuary will undertake the next actuarial investigation at 30 June 2010 to ascertain if additional contributions are required.
The CMSSP Fund's liability was determined in the 31 December 2008 actuarial investigation pursuant to the requirements of the Australian Accounting Standard AAS 25 as follows:
31 December 2008
$ Millions
Net Market Value of Assets
60.4
Accrued Benefits (per accounting standards)
51.4
Difference between Assets and Accrued Benefits
9.0
Vested Benefits
58.7
Vested Benefits Index
114%
The total amount of superannuation contributions paid by Melbourne City Council (inclusive of its wholly owned subsidiaries Citywide Pty Ltd, Queen Victoria Market Pty Ltd and Melbourne Wholesale Fish Market Pty Ltd.) during the year was $9,800,615 (2008: $8,540,040).
Council has an ongoing obligation to share in the future experience of the Local Authorities Superannuation Fund Defined Benefits plan and the City of Melbourne Superannuation sub-plan. Favourable or unfavourable variations may arise should the experience of the Funds differ from the assumptions made by the fund's actuary in estimating the fund's accrued benefit liability.
CityWide Services Solutions Pty Ltd contributes in respect of its employees to the following sub-plans of the Local Authorities Superannuation Fund:
