Employers blamed for R7bn in unpaid pension contributions
Errant employers are responsible for about R7 billion of unpaid pension fund contributions.
Members whose employers do not pay contributions to the pension fund have recourse to the Pension Funds Adjudicator who can order employers to pay a member the benefits they are due, and this order can be executed by a sheriff of the court.
Addressing the Pension Lawyers Conference, the Pension Funds Adjudicator Muvhango Lukhaimane said the bulk of complaints to her office concern withdrawal benefits and Section 13A compliance in the payment of contributions by employers. This accounts for approximately 83% of all complaints finalised.
Lukhaimane said a negligible number of funds have approached her office for assistance with employers not paying contributions.
“Even in these instances, the Office of the Pension Funds Adjudicator (OPFA) can only assist with partial recovery of the debt as a portion thereof is affected by prescription.
Most funds choose to act late against employers, thereby rendering a portion of the outstanding amount legally unrecoverable.
“Also, most funds fail to notify members that their employer had failed to pay contributions, leaving members to only discover such non-compliance at point of claim, which in certain circumstances results in a partial recovery owing to prescription.”
Lukhaimane said an emerging front for contention is also the calculation of overdue payment interest.
Because it is compound and meant to be punitive in nature, employers often delay by contesting its calculation. “The OPFA is considering leaving the overdue payment interest out of its orders, especially where a member lodged the complaint, and may only order the payment of fund interest.
The fund will thus be at liberty to pursue the claim for overdue payment interest.”
Lukhaimane said members often only find out their contributions have not been paid to the fund when they claim on a funeral policy, group life or disability policy, or when they withdraw from the fund or retire.
She said members need to know about the outstanding contributions in time so that they do not lose out because of prescription.
Claims not made within three years of an employer failing to pay contributions prescribe, and Lukhaimane said more than 50% of awards her office made for the complaints about arrear contributions were compromised by the fact that part of the claim had prescribed. Prescription has affected both individual members and funds acting on behalf of members, she said.
The Financial Services Conduct Authority (FSCA) has published a list of errant employers that runs to around 4 000 employers and includes many security companies that have not paid contributions to the Private Sector Security Provident Fund for their employees as agreed.
Lukhaimane said quite a substantial portion of those arrears may be unrecoverable due to prescription as most funds have only notified the FSCA of employers in arrears but have failed to institute legal proceedings to recover such arrears on behalf of members.
“This is disappointing as it is the duty of funds to pursue these outstanding contributions. When contributions are outstanding for three months, the fund trustees are obliged, in terms of the Pension Funds Act, to lodge a criminal case with the South African Police Service and hold the responsible person at the employer liable. The responsible person or even the full board of directors can be fined up to R10 million or imprisoned for up to 10 years,” said Lukhaimane.
Cape Times