Employer contributions counting towards the employee contribution rate

Previously, the KiwiSaver Act allowed employer contributions to count towards the employee contribution rate if the parties agreed. With the advent of compulsory employer contributions, this provision was to be amended from 1 April 2008 to require a minimum employee contribution of 4 percent unless the transitional rates in proposed section 66A applied (limited to employees who had already entered into such an agreement). The Finance and Expenditure Committee recommended that the transitional rule be extended to all employees if their employer agreed to contribute at the 4 percent contribution rate.

New section 66A allows employees to enter into an agreement with their employers that the employer will contribute at least 2 percent towards the employee's 4 percent minimum contribution rate, from 1 April 2008 until 31 March 2011, if:

• the employer and employee agree that they will use the transitional rates of contribution;
• the employer contribution for the payment of salary or wages is equal to or greater than the relevant transitional rate for the employee; and
• the employer contribution vests in the employee immediately after it is made.

The minimum contribution rate for employees whose employer agrees to contribute towards their contribution rate will be: