Fund whacked with 10% penalty for delaying death benefit payment

05 June 2017 Muvhango Lukhaimane, PFA
Muvhango Lukhaimane, Pension Funds Adjudicator.

Muvhango Lukhaimane, Pension Funds Adjudicator.

The Pension Funds Adjudicator has blamed pension funds that lacked expertise to identify beneficiaries for the increase in unclaimed benefits.

Muvhango Lukhaimane said the Registrar of Pension Funds had recently announced that there was approximately R10 billion worth of unclaimed benefits in the mining industry.

Referring to a case that came before the Tribunal, she said for a pension fund to cite prescription when beneficiaries came forward to claim these benefits did not provide a solution to the increase in unclaimed benefits.

The complainant (name withheld to protect identity of a minor child) brought a complaint against the Mineworkers Provident Fund (respondent) over the non-payment of the death benefit following the death of the respondent’s member.

The complainant was a partner of the deceased who passed away on 31 July 2004. The deceased was an employee of Harmony Gold Mining Limited and a member of the respondent at the time of his demise.

Upon the death of the deceased, a death benefit in the amount of R596 541.42 became available for distribution amongst the beneficiaries of the deceased.

The complainant was aggrieved by the failure of the respondent to allocate a portion of the death benefit to her minor son who was the son of the deceased and needed a portion of the death benefit for his maintenance.

She said the respondent always advised her that it was still investigating the existence of the deceased’s other beneficiaries. The complainant requested the Tribunal to investigate the matter and order the respondent to pay the death benefit.

The respondent raised prescription as a defence to the claim by the complainant. The respondent stated that the complaint was time-barred in terms of section 30I of the Pension Funds Act as it was lodged after a period of three years since the complainant’s cause of action arose.

The respondent stated that it contacted the deceased’s beneficiaries on 24 August 2016 in respect of the outstanding requirements. The complainant and other beneficiaries were contacted on 21 December 2016 and 4 February 2017 reminding them to submit certain documents and information.

In her determination, Ms Lukhaimane said the complaint was not time-barred.

Ms Lukhaimane said the deceased passed away on 31 July 2004. Section 37C(1)(a) of the Act gave the board of management of a fund a period of 12 months from the date of the deceased’s death, within which to trace and identify the deceased’s dependants and beneficiaries, and allocate the benefit to those who qualify to be allocated such a benefit.

Therefore, the cause of action arose on 30 July 2005 when the death benefit remained unpaid.

However, Section 14 of the Prescription Act 68 of 1969 (“Prescription Act”) provides for circumstances under which the running of prescription is interrupted.

On 16 February 2017, the respondent confirmed that there was an unclaimed death benefit in the amount of R596 541.42 available to the deceased’s beneficiaries.

“Therefore, in terms of section 14 of the Prescription Act, read with section 30I(1) of the Act, prescription against the respondent is suspended by a tacit acknowledgement of the debt due to the deceased’s potential beneficiaries, including the complainant.

“In the event, this Tribunal has jurisdiction to determine this complaint against the respondent.

“The respondent is dishonest and disingenuous to raise prescription on unclaimed benefits.

“The Registrar of Pension Funds has recently announced that there is approximately R10 billion worth of unclaimed benefits in the mining industry.

“Further, unclaimed benefit amounts and beneficiaries increase year on year. For the respondent to raise prescription when beneficiaries come forward to claim these benefits does not provide a solution to the situation.

“The respondent should also note that one of the reasons that results in the increase of unclaimed benefits is occasioned by the funds’ lack of expertise to identify beneficiaries and invalid/incomplete data maintained by funds and their administrators. These issues should under no circumstances be visited on the rightful claimants,” Ms Lukhaimane said.

She said a death benefit must be distributed and paid without any unreasonable delay.

“Where there is delay in the payment of a death benefit, such a delay must be reasonable and justifiable.

‘It should be noted that the board of the first respondent has 12 months within which to trace and identify the possible beneficiaries that might share in the benefit.

“The complainant submitted that upon the death of the deceased, she claimed the death benefit from the respondent. The respondent failed to provide reasons for the delay in the allocation and distribution of the death benefit other than that there are still outstanding documents.

“However, nine years have passed since the deceased’s demise wherein the respondent failed to complete its investigation.

“As a result of the respondent’s dilatory conduct, the deceased’s beneficiaries suffered prejudice in that they have potentially been denied access to benefits which may have become available to them had the investigation been completed on time.

“Considering the above, the board failed to act in terms of section 37C of the Act,” Ms Lukhaimane said, whilst ordering the board to complete its investigation and consider the relevant factors for an equitable distribution of death benefits to the deceased’s beneficiaries, without any further delay.

The first respondent was also ordered to pay 10% in compensatory damages (death benefit totalling R596 541.42 + 10% in compensatory damages = R656 195.56) for its delay in completing its investigations.

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