Four recent determinations by Dr Elmarie de la Rey, Acting Pension Funds Adjudicator
Remember pension payouts will have deductions
Pension fund members should consider that any final member’s share paid to them will have deductions levied for administration, fund expenses and risk benefits permitted by the fund’s rules.
M.R. Memane of Vergenoeg in Kimberley recently lodged a complaint with the Acting Pension Funds Adjudicator Dr Elmarie de la Rey on behalf of himself and 19 others employed by Samber Trading No.44 (Pty) Ltd trading as Dumpco Mining.
The complainants were members of the Chamber Retirement Fund (Provident Section) administered by Broksure Administrators (Pty) Ltd until their retrenchment in September 2007 for operational reasons.
The employees complained the fund had tried to enrich itself at their expense by withholding the employer’s contributions and treating retrenchment in the same way as a dismissal or resignation.
The tribunal was only able to determine in the case of Memane because no information was provided about the 19 other members.
Upon retrenchment in 2007 the complainants became entitled to receive withdrawal benefits from the fund. Memane received an amount in April 2008 as a withdrawal benefit and was then paid a further amount in November 2010 as an agterskot payment (a final or supplementary transfer value). The fund also paid the other complainants their withdrawal benefits during 2010.
In its response Broksure Administrators said it could not address the complainant’s submission that the benefit statements only reflected their member contributions because the statements were issued by and in the possession of the previous administrator, First Light Administration Services.
But the administrator disputed their claim that the employer’s contributions were withheld. It said the expression “contribution by and in respect of” meant both member and employer contributions were payable, plus fund interest after deduction of fund expenses.
It provided the tribunal with a detailed breakdown of the withdrawal benefit paid to Memane. This showed the total value of both his and his employer’s contributions, plus fund interest, less deductions for administration costs and risk benefits, group life cover, disability benefits, funeral benefits, and administration expenses.
It added the fund’s records showed agterskot amounts that would still be paid to the other members upon completion of their withdrawal notification forms.
In ruling De la Rey said Memane did not submit anything which showed he was prejudiced by the fund’s treatment of retrenchment in the same away as dismissal and resignation.
She also said the member share paid to the complainant was correctly computed in accordance with the fund’s rules and as a result the complaint was dismissed.
PFA orders municipality to pay death benefits
A Free State municipality has been ordered to pay the death benefits due to beneficiaries of two deceased employees, after failing to notify its provident fund of the employees’ deaths.
Ruling in the two separate cases the Acting Pension Funds Adjudicator (PFA) Dr Elmarie de la Rey said: “By failing to notify the first respondent South African Municipal Workers’ Union National Provident Fund about the deaths, the second respondent Kopanong Municipality had breached its duty of good faith derived from common law that it owes to its employees.”
The Municipal Manager, Miss L Moletsane, also did not respond to any attempts by the complainant or the Adjudicator to contact her.
In the first case the deceased, C D Rasigo, was the common law spouse of the complainant Miss S L Makamela of Itumeleng Location in Jagersfontein, Free State. He passed away on 27 December 2001 while in the employ of the Kopanong Municipality. Any benefit from his pension fund would have become payable to the complainant in December 2002 following the death of the deceased in December 2001.
The second complaint was lodged by M.I. Matekane of Charlesville in Jagersfontein. He was the son of another Kopanong Municipality employee Moiloa Tsoeu Ernest who died on 12 September 2004.
Both deceased men were members of the South African Municipal Workers’ Union National Provident Fund by virtue of their employment with the municipality.
The municipality made monthly provident fund deductions on Rasigo’s salary and he paid monthly contributions to the fund.
Maketane also contributed towards the fund and was a member when he died. But the municipality did not transmit his monthly contributions to the fund.
No death benefits were paid to either of their beneficiaries after their deaths. Their separate complaints were lodged with the Adjudicator in August 2006.
Failure to Notify
In both submissions the fund said the employer failed to notify it and its insurer, Momentum, of the deaths immediately or within six months as stipulated in its rules. It suggested the claims be directed to the employer because of the late submissions.
The Acting PFA opted to condone the fact that the first complaint from S L Makamela was lodged with the office almost a year after the time limit of three years for complaints, as stipulated in Section 30I of the Pension Funds Act.
This was because at the time the complaint was lodged, a subsection in the Act - which was subsequently removed by the Pension Funds Amendment Act, 11 of 2007 - gave the Adjudicator authority to condone non-compliance with the three year time-bar, provided good cause existed.
De la Rey said this “good cause” did exist because the complainant had proof of no cooperation from her employer despite engaging Messrs Financial Planning to act on her behalf to have her matter resolved.
Attached to her complaint were copies of letters dating back to 2004 that were sent to the employer by Messrs Financial Planning. The letters queried amongst other things why the employer had not notified the fund about the death of the deceased.
Determinations
In both determinations the tribunal said Section 37C of the Pension Funds Act, which governs the disposition of death benefits, compelled the fund’s board of trustees to identify the beneficiaries of a deceased member. The board should also distribute the proceeds of a death benefit “without following a rigid policy that takes no account of personal circumstances or the prevailing situation”.
The fund’s rules also stipulated that a member who dies while in service should be due the pre-retirement death risk benefit specified in the schedule together with his member’s share as at date of death.
In both cases the South African Municipal Workers’ Union National Provident Fund was ordered to calculate the amount of the death benefit that would have been payable to the complainants had the fund been notified about the deceased’s deaths timeously.
Interest would also be due at the rate of 15.5% per annum from when the benefit became payable up to the date of the Acting PFA’s determination.
The fund was also directed to determine the beneficiaries and their benefit entitlements and inform the employer accordingly within six weeks of the date of the determination.
Finally Kopanong Municipality was directed to pay the identified beneficiaries within seven days of receipt of this information.
Death benefits only due if deceased was an active fund member, says PFA
Surviving dependants should bear in mind that a death benefit is only due to them if the deceased was an active member of a pension fund at time of death.
In December 2008 EM Letho of Natalspruit lodged a complaint with the Adjudicator against Metal Industries Provident Fund (“first respondent”) administered by Metal Industries Benefits Funds Administrators (Pty) Ltd (“second respondent”).
Letho’s husband passed away on 19 July 2004. He was employed in the metal industries for some time and was a member of the Metal Industries Provident Fund.
Before his death he secured contract employment at Cason Engineering for six months from 25 June 2003 to 30 December 2003 and again from 1 March 2004 to 23 April 2004.
After his death his widow applied for death benefits from the fund.
But the respondents said at the time Letho died on 19 July 2004 he was not employed in the industry and was not a member of the fund. His employment with Cason ended on 23 April 2004. This was also his last date of membership of the fund.
The fund said it had paid the complainant in full and final settlement of any claims in respect of the deceased’s membership.
A withdrawal benefit paid into the deceased’s bank account in June 2003 when he was still alive was for service until 29 December 2002.
Another benefit paid to his widow some years after his death in May 2010 was the withdrawal benefit due for his service to Cason Engineering. This amount was paid into the widow’s bank account.
De la Rey dismissed the complaint, stating the deceased was not a member of the fund when he passed away and the first respondent was thus not liable to pay a death benefit to his dependants.
Divorcee’s claim for higher pension and interest dismissed
A registered fund is legally obliged to deduct any outstanding housing loan amounts from a pension fund credit, prior to payment of pension interest and employees’ tax to a non-member spouse through a divorce decree.
This is provided that the aggregate of all amounts deducted does not exceed the member’s pension interest available at any given time.
In a recent ruling the Acting Pension Funds Adjudicator Dr Elmarie de la Rey dismissed the complaint of L. Farrell of Westridge in Mitchell’s Plain, who was dissatisfied with the pension interest paid to her from her former husband’s pension fund. She was also aggrieved with the deduction of an outstanding housing loan and tax from the pension interest and said she should have been burdened with only 50% of the outstanding loan.
The couple’s March 2003 divorce decree made provision for payment of 50% of the member spouse’s pension interest to the complainant.
Farrell said her former spouse’s fund credit should have been higher because he had been employed for 21 years at the City of Cape Town at the time of their divorce. He was a member of the Cape Municipal Pension Fund (“first respondent”) administered by Alexander Forbes Financial Services (Pty) Ltd (“second respondent”). De la Rey found that the member’s fund credit as stated by the fund was correct.
Regarding the deduction of a housing loan amount, De la Rey found that Section 37D(3)(a) allowed the fund to deduct the housing loan balance from the fund credit prior to effecting the payment of pension interest to the complainant. She also found that the amount paid to the complainant was correctly calculated as follows: member’s fund credit, less outstanding housing loan = member’s fund credit as at date of divorce, of which the complainant was paid 50%.
Farrell also claimed that tax had been applied to her share of pension interest. The fund showed that it had applied for tax on the member spouse’s share of fund based on the tax rate of 19.5% provided by SARS. De la Rey found that pension interest is deemed to be an income and is thus taxable. This was recovered solely from the member spouse’s share and not borne by the complainant.
Finally Farrell sought interest on the fund credit once the housing loan was repaid because her former spouse still paid instalments for the housing loan, despite the deduction of the outstanding amount.
De la Rey said the complainant was not a member or beneficiary of the pension fund and was not entitled to any other interest or growth, as stated in Section 37D(4 of the Act.
She pointed out the deduction of an outstanding housing loan from pension interest did not mean the housing loan was settled immediately, as no actual cash was paid to the creditor. What it meant was that the outstanding loan was considered when computing the available pension interest. In the event the member spouse left employment he would be entitled to his withdrawal benefit less the outstanding housing loan balance, but he still had to continue with the agreed instalments.
De la Rey dismissed the complainant’s request for an order directing the fund to pay her any outstanding portion of pension interest and to hold her liable for only 50% of the housing loan.
