B13/1990 METHOD OF CALCULATING PENSION PAYMENT PERIOD

DATE OF ISSUE:  03 April 1990

METHOD OF CALCULATING PENSION PAYMENT PERIOD

INTRODUCTION

With effect from 28 December 1989, the method of calculating the payment of pension and allowances at a daily rate, paid fortnightly in advance, has been replaced by the method used by the Department of Social Security. The change means that a full fortnightly instalment of pension and/or allowances is payable to a pensioner who is alive and eligible on that particular payday. This applies to all pension and allowances except the Victoria Cross Allowance, Loss of Earnings and Temporary Incapacity Allowance.

REASONS FOR CHANGE

2.It is intended that this change should simplify the administrative process when service pensioners transfer between the Departments of Social Security and Veterans' Affairs. This should subsequently reduce the number of overpayments and the intrusion caused by recovery at a time of bereavement. It also simplifies the calculation of initial pension payment, specifically arrears, and ensures consistent treatment of pensioners by the two Departments.

EFFECT OF THE PENSION PERIOD CALCULATION CHANGE

3.The effect of this change to the method of calculating a pension payment period is that where the date of effect is on or after 28 December 1989, pension payments must be effective from a payday. Where the date of effect is prior to this change, pension payments may still commence on any day regardless of whether or not it is a payday. Amendments have been made to sections 5 and 121 of the VEA.

Grants of service pension.

4.For those who lodge an application (formal or informal) or become eligible for service pension and allowances on or after 28 December 1989, the date of grant of pension should be from the payday following lodgement of application or payday following date of eligibility, ie. payday after 60th birthday or ceasing work. The amount of pension payable from the date of grant will constitute a full instalment.

Grants of disability pension.

5.Where the entitlement date of a grant of Disability Pension or War Widows' Pension is on or after 28 December 1989, the pension is payable from the payday after the entitlement date, or, if the entitlement date falls on a payday, then pension is payable from that date. As for service pensions, a full instalment is payable from the date of grant.

6.It may therefore be necessary for Determining Officers, etc. to include in their decisions a statement advising that Disability Pension will be granted/increased from the payday after the entitlement date.

Exceptions to entitlement date commencing on a payday.

7.Temporary Incapacity Allowance and Loss of Earnings Allowance are generally payable in respect of a period which has already lapsed and therefore are not included in these changes. Section 5(14) of the VEA is presently being amended to ensure that existing payment arrangements continue to apply to these allowances.

Recreation Transport Allowance.

8.Payment of Recreation Transport Allowance (RTA) is processed differently in each state, therefore the effect of the pension payment period calculation change on these payments also differs. Ultimately, emphasis must be placed on ensuring that, regardless of the regularity of payments, RTA must be paid in respect of those paydays on which the pensioner was alive and eligible to receive that allowance.

9.It is hoped that work will begin in April 1990 to pay RTA payments automatically each fortnight.

Twelve Month Rule.

10.Any variation in service pension rate due to income being maintained in the pension assessment for a period of 12 months must be effective from the payday following the date of receipt or the date on which the person became entitled to receive that money, whichever is the earlier.

11.This income should be maintained in the assessment for a period of 12 months, or if that 12 month period does not end on a payday, then for a maximum of 26 paydays.

Deprived Income and Assets.

12.As with the 12 month rule above, deprived income or assets must be maintained in the assessment from the payday after the deprivation occurred. This will be maintained at that same rate for 26 paydays, then reduced by 10% annually as per existing guidelines.

13.Where deprivation occurred prior to 28 December 1989, then the date on which the amount is reduced will not be the actual 12 month anniversary (unless it falls on a payday), but the payday prior to the anniversary.

Increases, reductions, suspensions, cancellations of Pension and Allowances.

14.All variations to the rate of pension and allowances effective on or after 28 December 1989 should take effect on a pension payday. Some of those situations where the date of effect is currently other than a payday, include:

-increase of service pension and allowances where advice is received in advance;

-grant of service pension and allowances;

-grant or variation, suspension or cancellation of war widows' pension, disability pension and allowances;

-date of operation of decisions made by the VRB or AAT;

-reduction in rent assistance due to disability pension grant or increase;

-overpayments occurring on or after 1 November 1985;

-loss of eligibility, eg. remarriage of a widow, de facto wife separates from veteran, child's 16th birthday;

-discharge from a benevolent home;

Education Allowance.

15.Payment of Education Allowance would normally cover the period 1 January to and including 31 December in any one year. Following the payday calculation change, these dates of effect must fall on a payday. Therefore, for example, 1990 Education Allowance payments should commence on 11 January 1990 to and including payday 27 December 1990, being 26 paydays. In those calendar years containing 27 paydays, the 27th payment should also be paid.

EFFECT ON TREATMENT AND FRINGE BENEFIT ELIGIBILITY.

Grant.

16.Although pensions and allowances will now be payable from the payday after the date on which the pensioner becomes eligible for pension, the provision of treatment and entitlement to fringe benefits will still begin from the day of eligibility.

Loss of eligibility.

17.Where pension is cancelled due to the pensioner losingeligibility, fringe benefits and the entitlement to be provided with medical treatment will also be cancelled on the same payday.

Period of Grace.

18.Since 1 January 1988, certain categories of service pensioners receive the benefit of a 13 week period of grace before fringe benefits entitlement ceases. In such cases, where the period of grace ends after 28 December 1989, fringe benefits should cease from the next payday not covered within that 13 week period of grace, ie. after 14 weeks. The support documentation will show the date on which the period of grace ends, but the advice to pensioners should explain that although the period of grace is unchanged, fringe benefits will cease from the next payday.

TRANSFERS BETWEEN DVA AND DSS

19.Where a pensioner wishes to transfer from DVA to DSS, or vice versa, the arrangements are usually made directly by officers from each Department. Currently where a pensioner transfers to DVA, this Department commences payment of service pension from the day following the payday on which DSS make their final payment.

20.The effective dates when a DVA pensioner transfers to DSS are slightly different due to DVA paying pension based on a daily rate. Therefore, DVA could pay pension on a payday which covered the 14 day period from that payday to and including the day prior to the next payday. DSS could therefore commence their payments from one of their paydays and DVA could pay pension for the odd days between the last full DVA payment and the date DSS commence payment.

21.Following the changes to the calculation of DVA pension payment periods, from 28 December 1989 the procedures and dates used when transferring pensioners between Departments have also been reviewed. The DSS approach of paying a pension instalment to a pensioner who is alive and eligible on a payday has been adopted.

22.This is shown in the following example where a pensioner transfers from DVA to DSS.

In Advance: DVA pensioner transferring to DSS.

DSS

(DOG)

4/1 — 18/1 — 1/2 — 15/2

_|_________|_________|_________|_________|_________|__________|

  |                  |                  |                  |                  |                  |

11/1      25/1 — 8/2

   (DLP)     (CANCEL)

25/01/90  DVA date of last payment;

01/02/90  DSS anticipated date of grant;

(Nil adjustment).

Date of effect on authority would be 8/02/90

(SP cancellation).

This example works exactly the same in reverse, when a pensioner transfers from DSS to DVA (a second example is therefore not necessary).

23.Most transfers are arranged in advance as shown in the previous example. There are, however, some situations where a transfer is done in arrears, ie. where the granting Department can pay a higher rate of pension. In these cases the only rule is that the granting Department must make their first regular payment on a payday after the cancelling Department's date of last payment. This ensures that there are enough arrears to cover the overpayment.

In Arrears: DVA pensioner transferring to DSS.

DSS

(DOG)(1st REGULAR)

4/1 — 18/1 — 1/2 — 15/2

__|_________|_________|_________|_________|_________|________|__

    |      |           | |      |                              |

11/1 — 25/1 — 8/2

(DLP)(CANCEL)

DVA 18/01/90  DSS date of grant; 25/01/90  DVA date of last payment; 01/02/90  DSS date of first regular payment*

DVA overpayment:  25/01/90 DSS arrears:18/01/90

* Remember, DSS must make their first regular payment on a payday after DVA's date of last payment to ensure there are enough arrears to cover the overpayment.

The authority, in this case, would contain 2 effective dates:

25/01/90  SP rate --> NIL  (to raise the overpayment)

08/02/90  SP rate --> NIL  (to actually cancel SP).

Again, this example works exactly the same when a pensioner transfers from DSS to DVA.

24.Although these procedures result in the pensioner receiving two instalments of pension within a fortnight, it replaces the practice of DVA granting a pensioner transferring from DSS on the day after DSS made their final pension payment.

25.This second pension instalment paid within the one fortnight is not considered an overpayment as DVA pension is no longer calculated on a daily basis and paid fortnightly in advance. Instead, an instalment of pension is payable to a pensioner who is alive and eligible on that payday.

26.Procedures for liaison with DSS differ in each branch office and will therefore remain the responsibility of the branches. DSS Central Office has been advised of the changes and should notify their regional office staff. It may be helpful to be aware, when dealing with a DSS officer regarding a transfer, that they may not yet be fully briefed on these changes.

SYSTEMS

27.Some system changes have been made to accommodate the differing dates for pension grants and the commencement of fringe benefits or treatment entitlement.

Service Pensions:

28.Assessment Control (PP.AC) will allow a date of effect prior to 28 December 1989 to be any date, but for a date of effect on or after 28 December 1989, will only allow a DVA payday.

29.Arrears and Tax screens (PP.AR and PP.TX) will restrict the input of dates to those applicable to AC as above.

30.Historic Dates screen (PP.HD) will now play a greater role. A restriction will be placed on the date of grant of service pension and/or allowances field to allow only a DVA payday on or after 28 December 1989 to be entered.

31.Dates of effect for full treatment and fringe benefits will be unrestricted. Therefore, this screen is the one which will set the different dates for commencement of full treatment or fringe benefits and the commencement of pension grant.

32.The current edit that does not allow the date for full treatment and fringe benefits to be prior to the service pension grant date will be removed.

33.Where there are no arrears lines in the assessment, the date of commencement of full treatment or fringe benefits on the HD screen will default from the AC screen. This date will actually reflect the date of commencement of pension grant and therefore must be overwritten and replaced with the earlier date.

34.Submission (PP.SU) will allow only DVA paydays on or after 28 December 1989 as valid effective dates. Dates prior to 28 December 1989 will continue to be valid regardless of whether or not they are on a payday.

Disability Pensions:

35.The current procedure when accessing the Claims Management System (CMS) to process a disability pension grant or variation will remain unchanged. The date of eligibility for treatment or fringe benefits will be the date recorded under the CMS, which then defaults to the PIPS system. The AR screen will then be used to record the payday from which payment should commence.

36.The same restriction as previously explained for the Arrears and Submission screens will apply.

LEGISLATION

37.The definition of pension pay day has been included in Section 5(1) of the VEA and reads:

"`pension pay day' means:

(a)the Thursday falling on 28 December 1989; and

(b)each succeeding alternate Thursday."

38.The VEA currently still refers to many dates of effect which are not paydays, therefore the following Section 5(14) has been added:

"Where a determination has been made under this Act that a pension or allowance is payable as from a particular day (in this subsection called the `day of effect') that is not a pension pay day, the pension or allowance is payable on and from the next pension pay day after the day of effect."

39.Subsection 121(1) of the VEA (Instalment of pension) has been omitted and replaced with the following:

"A fortnightly instalment of pension is payable to a person on each pension pay day on which the person is entitled to receive pension.

(1A) "Where a person becomes entitled to receive pension on a pension pay day that occurs before the day (in this subsection called the `entitlement day') on which, but for the operation of subsection 20(1) or (2), 21(2) or 46(3), the person would have become entitled to receive that pension, any instalment of that pension that, but for this subsection, would have been payable to the person on that pension pay day is payable to the person:

(a)if the entitlement day is a pension pay day -on the entitlement day; or

(b)in any other case -on the first pension pay day after the entitlement day."

40.Subsection 121(5) has been omitted and substituted with:

"In this section: `pension' includes an allowance under this Act, other than Victoria Cross allowance."

PETER HAWKER

NATIONAL PROGRAM MANAGER

BENEFITS PROGRAM