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South Africa

Author: Pat Sidley|

11 April 2011 16:48

Don’t delay notifying pension funds

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You could be rapped over the knuckles.

JOHANNESBURG - Either the Acting Pension Funds Adjudicator, Dr Elmarie de la Rey is tougher than her predecessors, or a run of bad luck for pension fund members has struck in the last few weeks of cases.

Several applications for her adjudicator’s eye to peruse a situation of difficulty for members and find in their favour, have not found favour with De la Rey. But among the current crop of findings sent out by her office, is a rapping over the knuckles for employers, Anglo Platinum Mine (Pty) Ltd, which took its time in notifying the pension fund of its employee’s death.

De la Rey told the company to pay an outstanding payment of a death benefit owed to the family of M M Sekiti since his death in June 2004.  His parents had received the payment of pension and provident fund amounts from the fund, but not the death benefit.  The death benefit would have been in the region of R109 000 but was repudiated by the insurer as the forms that should have been filled in by the employer had been delivered too late. Anglo Platinum Mine as the employer would now be liable for more, as it will have interest added on the outstanding amount from the time of the miner’s death.

Dr De la Rey said in her ruling: “The employer in a pension fund at the very least owes a duty of good faith to its employees. It is essential for the employer to complete a notification form indicating the cause of the termination of employment for the fund to determine which benefit is payable.”

By virtue of his employment, the deceased was a member of Amplats Retirement Fund (Provident and Pension Section) at time of death. His parents were listed as his beneficiaries.

The fund was administered by Old Mutual Life Assurance Company (SA) Limited (second respondent), with consultancy services provided by Alexander Forbes Financial Services (third respondent).

The complainants said they made several attempts to receive the death benefit payment but had not received this. They sought help from the PFA three and a half years later in December 2007.     

In its response the second respondent, fund administrator Old Mutual Life Assurance Company, confirmed the benefit payable in respect of the deceased was finalised on October 13 2010 as being the full and final settlement of all benefits.

The amounts payable were calculated as the provident fund amount, less provident fund tax and any advances paid, which amounted to R13 189.71, and the pension fund amount less pension fund tax, which amounted to R8 389.51.

In its response the third respondent, fund consultant Alexander Forbes Financial Services, submitted that it received the original complaint in February 2008 and carried out detailed investigations to establish which fund the deceased belonged to and if a benefit was due.

The investigations showed the deceased did not complete a nomination form. They confirmed the complainants as the likely beneficiaries, because the deceased was never married, had no children and was survived by his brother.

It said a copy of the deceased’s salary advice showed his employer as Bafokeng Rasimone Platinum Mine, which was not a participating employer in the fund. It said the deceased was transferred from Bafokeng Rasimone Platinum Mine to Lebowa Platinum Mine, which was a participating employer in the fund at the time.

The third respondent said a copy of the ID, payslip, death certificate and proof of fund membership had been forwarded to the insurer Capital Alliance Group Risk in May 2006.

But the death notification form was still outstanding from the employer and was only received by the fund on July 3 2009.

The fund consultant submitted that the calculations in 2006 showed a benefit of R7, 564.91 in the pension section and a benefit of R9, 754.28 (excluding the group life benefit) in the provident section of the Fund.

In June 2009 the trustees decided to make cash payments of 50% each to the deceased’s parents for pension benefits of R 9, 379.08 and the provident fund benefit of R12 093.48.

The group life benefit of 4 X Annual Salary or R 108 686.00 was repudiated by the insurer on contractual grounds. A second request to the insurer to consider payment of the claim on an ex-gratia basis had not been approved or declined.          

No response was received from the fourth respondent, the employer Anglo Platinum Mine.

In ruling Dr De la Rey said: “The payment of any benefit that is due to a member of a fund is regulated by the fund’s rules which state ‘the benefit payable ... shall be insured with a Registered Insurer and no such benefit shall be paid unless the claim for the benefit has been admitted by the Registered Insurer’. 

“Due to late notification, the insured benefit claim was repudiated on contractual grounds. The late notification of the member’s death to the insurer was the result of fault on the part of the employer. In the circumstances, the complainants should be put in as good a position as if the wrong had not been committed.”

Dr De la Rey ordered the fund to calculate the amount of the death benefit that would have been payable to the complainants had it been properly notified about the deceased’s death timeously. Interest would be levied at the rate of 15.5% per annum for six years from 25 June 2005 to the 25 March 2011 date of determination.

The employer was directed to pay the complainants the amount due within seven days of receipt of the fund’s calculations.

Several past members of funds were not so lucky.

Because death benefits only become payable when the member dies, it cannot be paid while he is still alive. Furthermore, he would have had to have died while still employed in order for death benefits to have been paid.

The complainant, a bus driver whose name was with held, argued that he had paid towards all the benefits and should receive all of them when he left the employment – not only the withdrawal benefit of R25 428.00 that he was paid. He had not understood, it appeared, what he was entitled to and the acting pension funds adjudicator turned his request down.

She was forced to a similar conclusion when a complaint was brought to her by Ms V L Burjins, who had wanted to pay for further studies but had not been able to persuade her retirement annuity fund to allow her to withdraw her funds before the mandatory age of 55.

The Income Tax Act, it was explained by Old Mutual who was the second respondent in the case, did not allow such funds to be paid out before the age of 55 or after the age of 70. Burjins, however, was 31. The only exception to the law was if she had become permanently disabled and could not do her job.

In the case of T L Matlou, De la Rey found that this pension fund member had failed to respond to correspondence from his pension fund and that this could be seen as an act of omission against which he would have no recourse.  The issue was a switch of his investment in his fund from higher risk to lower risk. He had not answered the fund when it needed his authority for the switch and wanted to change the situation. This request was turned down.

Write to Pat Sidley: pat@moneyweb.co.za

Topics: pensions funds, income tax act



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