KiwiSaver

Opting In

This information is for KiwiSaver Employment Details (KED) reporting to the IRD. KED reporting is a facet of IR-Filing which allows employers to electronically notify the IRD of employees who start or stop participation in KiwiSaver. The KS1 form is a facet of KED reporting which covers the Opt In process, and can be generated by the Payroll by way of the KiwiSaver Employment Details report/KED file.

Turn the Make KiwiSaver Contributions option on in order to opt in.

Considerations relating to Opting In:

• from 1 July 2007, employees starting new employment must be automatically enrolled in KiwiSaver. Casual employees are not automatically enrolled, and must be manually opted in.
• participation in KiwiSaver is not compulsory for existing employees
• is the employee aged 18 or older as the intended first contribution date
• is the employee entitled to be in New Zealand indefinitely
• is the employee permanent, as opposed to casual
• is the employer exempt from KiwiSaver

As a general rule, opt in employees that you have hired since 1 July 2007, and opt in employees hired before 1 July 2007 that have voluntarily chosen to participate.

NOTE: Employees with the tax code NSW are not eligible for KiwiSaver, and should therefore not be opted in.

IRD's Opt In Guidelines:

• Participation in KiwiSaver will not be compulsory and will be open for individuals to join provided they are entitled to be in New Zealand indefinitely.
• Existing employees can opt in to KiwiSaver through their employer or by contracting directly with a provider.
• Employees automatically enrolled will have KiwiSaver contributions deducted from their salary or wages from their first pay that is dated on or after 1 July 2007.
• The Act requires employers to provide all new employees subject to automatic enrollment with an information pack, supplied by Inland Revenue. This pack will contain information about KiwiSaver, an opt-out form and information about default providers and schemes.
• An up-front government contribution of $1,000 will be credited to a member's KiwiSaver account when contributions are first paid by Inland Revenue to the provider.
• The Act allows employers apply to the Government Actuary for an exemption from the automatic enrolment rules if they provide access to an approved registered superannuation scheme. Employees whose employer is exempt from the automatic enrollment provisions will still be able to join KiwiSaver (by opting in).

Opting Out

New employees can opt out of KiwiSaver within the Opt Out period. Employees may not opt out until they have been employed for two weeks (14 days), but must opt out within eight weeks (56 days) from the day they started. Opting in/out is performed by changing the settings on the KiwiSaver section of the Standard Pay.

New Employees - Automatically Enrolled

It is possible for employees to have been automatically enrolled by the pay clerk, and then give notice to opt out within the opt-out period. Turn the Make KiwiSaver Contributions option off in order to stop future KiwiSaver transactions. The Opt Out fields will become enabled. Tick the Opt Out New Employee option. Check for the presence of KiwiSaver transactions in any pays which may be open at the time.

New Employees - Not Yet Enrolled

The Make KiwiSaver Contributions option will be off. The Opt Out fields will be enabled. Tick the Opt Out New Employee option. Enter the date on which the Opt Out decision was made. You will still need to enter bank account details.

For more information on opting employees out of KiwiSaver, see "Employees who want to opt out of KiwiSaver" on the IRD website.

Grossing-up Employer Contributions

Employer contributions are liable for Employer Superannuation Contribution Tax (ESCT). If employers are "locked in" to an agreement with an employee for a set percentage of employer contributions, in order to meet the terms of that agreement, the amount of employer contributions may need to be grossed-up to ensure that the employee receives their full entitlement.

For example, an employee earning $2,500 per week ($130,000 per annum) has an employment contract that requires a 4% employee contribution, matched by a 4% employer contribution. The employee's weekly savings are:

Contribution	Amount
KiwiSaver deduction (4%)	$100.00
Employer contribution (4%)	$100.00
Total contribution	$200.00

ESCT must be paid on the employer contribution (with a salary of $130,000, the employee’s ESCT rate is 33%).

Once ESCT is deducted, the employee's savings will be:

Contribution	Amount
KiwiSaver deduction (4%)	$100.00
Employer contribution (4%)	$100.00
Less 33% ESCT on employer contribution	-$33.00
Total contribution	$167.00

However, as the employer has agreed contractually to contribute 4%, not 4% less ESCT, it must gross-up its contribution so that the employee retains the full 4%. Ticking the Gross-up Employer Contribution option on the KiwiSaver Group Maintenance window means that the employer contribution is grossed-up using the following formula:

ESCT = (esct_rate / (1 – esct_rate)) x contribution

Using an ESCT rate of 33%, the gross-up calculation on the employer contribution is as follows:

ESCT = (0.33 / (1 - 0.33)) x $100.00

ESCT = (0.33 / 0.67) x $100.00

ESCT = 0.4925 x $100.00

ESCT = $49.25

The employee's savings are now:

Contribution	Amount
KiwiSaver deduction (4%)	$100.00
Employer contribution (4%)	$149.25
Less 33% ESCT on grossed-up employer contribution	-$49.25
Total contribution	$200.00

NOTE: More information on grossing-up employer contributions can be found on the IRD's website.