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Employer cannot recover funeral loan from death benefit, PFA rules

26 February 2014 Muvhango Lukhaimane, Pension Funds Adjudicator

An employer has failed in its attempt to be repaid from death benefits for the loans it granted to the families of three deceased members to pay for funeral expenses.

The Pension Funds Adjudicator Ms Muvhango Lukhaimane has ruled that because a death benefit does not form part of the deceased estate, funeral expenses which are obligations of the deceased estate cannot be paid from death benefits.

Ms Von Zeuner, a director of Two Ten Chemicals (Pty) Ltd, complained to the Office of the Pension Funds Adjudicator that the Chemical Industries National Provident Fund (first respondent) had not repaid the company for loans of R5000 each granted to the families of Mr T Ngobeni, Ms N Bambeni and Mr J Ngobeni who passed away on 27 May 2012, 22 January 2012 and 22 August 2011 respectively.

The company had expected for the loans to be recovered from any death benefits that became
payable by the first respondent.

Upon T Ngobeni’s death, a death benefit of R257 387.10 became payable to his dependants and beneficiaries by the first respondent. Upon N Bambeni’s death, a death benefit of R81 058.65 became payable and upon J Ngobeni’s demise, a death benefit of an undisclosed amount became payable.

In its response to the Pension Funds Adjudicator, NBC Fund Administration Services (Pty) Ltd (second respondent) said in respect of T Ngobeni, a death benefit of R257 387.10 became payable. After identifying his dependants and beneficiaries, R47 884.23 was paid to P Ngobeni (his spouse) on 15 August 2013; R47 884.23 was paid to C Ngobeni (his daughter) on 2 July 2013; R47 884.23 was paid to B Ngobeni (his daughter) on 30 September 2013 and R12 601.11 was paid to the guardian of P Makhubela on her behalf.

A benefit of R50 590.68 was allocated to T Ngobeni and would be paid to her when she turns 18 on 5 December 2013. The benefit due in respect of P Ngobeni had not been paid as the first respondent awaited a payment instruction in order for payment to be made.

In respect of N Bambeni, a death benefit of R81 058.65 became payable. The benefit was allocated and paid to her mother, stepmother, two siblings, two sons and two nephews.

However, a benefit for one dependant, namely L Mtengwane in the amount of R5 412.60, had not yet been paid as the first respondent awaited payment instructions.

In respect of J Ngobeni, the claim was repudiated due to late notification. However, the employer advised that claim documentation was submitted on time.

In her determination, Ms Lukhaimane said in terms of Section 37C (1) of the Pension Funds
Act, provides that a death benefit shall not form part of the deceased estate.

"Therefore, the employer is not permitted to deduct the outstanding balances of the funeral loans granted to the families of the deceased members from the death benefits.

"The funeral loans are debts of the deceased estates and should be recovered from the deceased estates,” said Ms Lukhaimane whilst dismissing the complaint.

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