We have an employee who has been a KiwiSaver member more than five years and is also over 65 years old.
We recently received a letter from the IRD letting us know that we were no longer required to make compulsory employer contributions (and hadn't needed to for nearly a year).
Whose responsibility is it to let the employer know when to stop making compulsory contributions?
Should we be asking our employees how old they are, and how long they have been in the scheme when we employ them?
Employer contributions are required to be paid under the KiwiSaver Act only until the employee is entitled as of right to withdraw an amount from a KiwiSaver scheme under the KiwiSaver Scheme Rules (ie, until the person has been a KiwiSaver member for five or more years and has reached the age of eligibility for New Zealand Superannuation, currently 65 years of age).
It is nice that Inland Revenue let you know, although notification a year earlier would have been better for you no doubt.
However, under the law, there is no legal obligation for Inland Revenue to notify employers that they are no longer required to make KiwiSaver contributions for an employee.
A provider is required to notify Inland Revenue two months before the date on which the member will be entitled to withdraw their balance from a KiwiSaver scheme.
Inland Revenue may notify the member's employer of the date on and from which the member is entitled to withdraw their balance, so the employer can cease making compulsory employer contributions.
I understand that Inland Revenue has a policy of notifying employers whenever Inland Revenue receives the information from a provider, treating the "may" as a "will" in the legislation.
However, this process relies on providers having the member's date of birth and notifying Inland Revenue ahead of time, within the required two-month period.
Sometimes providers do not hold date of birth information for members or the information that they hold is incorrect and therefore the provider is unable to notify Inland Revenue and in turn Inland Revenue is unable to notify the employer.
Where providers provide the correct information and notify Inland Revenue within the required timeframe, Inland Revenue's policy is to generate a notification letter to employers.
One way for an employer to be sure they know when they are permitted to stop making compulsory employer contributions under the KiwiSaver Act, without relying on notification from Inland Revenue, is to ask current and new staff how old they are and how long they have been a KiwiSaver member (if they are a KiwiSaver member) when they are employed.
This would be permitted under current legislative provisions, including, for example, the Human Rights legislation, provided the employer is not using the information to discriminate against the employee.
The employer should explain to the employee at the time the information is collected the reason why it is being collected, for Privacy Act reasons. This may also lessen the risk of questions and complaints that the information is being collected for unfair means.
Emma Harding, Chapman Tripp senior solicitor.
Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.
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