Members need to check up on the trustees

17 August 2006 Angelo Coppola

The latest ruling from the PFA could have some interesting consequences. According to Naleen Jeram- the deputy PFA the decision of the registrar has been taken on appeal to the Appeal Board- and to date- from the evidence before the PFA no ruling has been made.

Jeram confirmed that when a rule is amended trustees of the fund have a duty to inform all members of the rule amendments.

His advice to members is to always ensure that the correct rule has been applied in the computation of their benefits. Added to which, where the trustees propose to apply an amended rule- members must check that the rule has been approved by the registrar and the date of registration- this date represents the date on which the rule comes into effect.

The issue
The ruling concerns the application of a rule amendment not approved by the registrar of pension funds.

The background
In Meiring v Bel- Essex Provident Fund and Others, the complainant was employed by Bel- Essex Admin Holdings (Pty) Ltd and was a member of the fund. On 28 February 2002, the complainant left service of the employer and in terms of the rules of the fund, he was entitled to a withdrawal benefit.

From the documentary evidence, it appeared as if the amount was in the region of R431 000.00. The fund refused to pay the benefit on the basis that the fund trustees had passed a resolution that the rules be amended to the effect that no withdrawal benefit be paid upon the termination of a member's service, except if the termination is as a result of ill-health.

However, the registrar refused to approve the rule amendment on the basis that it contravened section 14A (dealing with minimum withdrawal benefits) of the Act. Hereafter, the complainant referred the matter to the adjudicators office.

The ruling
The adjudicator firstly held that the registered withdrawal rule applicable to the complainant makes provision for the immediate payment of the benefit after cessation of service or for a maximum period of six months after withdrawal from the fund.

The complainant was employed as a managing director of various subsidiary companies of the employer since May 1984 until February 2002. In terms of the rules, he was an executive who had completed more than 9 years of service and was thus entitled to his withdrawal benefit defined as his members share.

Furthermore, the proposed amendment to the existing withdrawal benefit rule has no legal validity until it has been approved and registered by the registrar.

The adjudicator further held that the conduct of the board of management is to be severely deprecated.

Notwithstanding two rulings from the Supreme Court of Appeal (the highest court in our country for all issues except constitutional issues) stating that the rules of the fund are supreme and only come into effect once they have been approved and registered by the registrar, the board of the fund, in blatant disregard of these rulings and several determinations by this Tribunal, simply decided that it would not apply the registered rules of the fund.

The law regarding pension fund rules as it currently stands is patently clear in terms of which the registered rules are king and remain valid until amended (approved by the registrar in terms of section 12 of the Act).

Had the complainant been legally represented in this matter, the adjudicator would have had no hesitation in making a cost order in favour of the complainant, a power very rarely exercised by the adjudicator.

The fund administrator was ordered to compute and pay the withdrawal benefit together with interest at 15.5% per annum from 1 March 2002 until date of payment, within 4 weeks of the date of the determination.

Editor's thoughts:

* Having read through the determination it's patently clear that either the trustees were negligent or they were ill-advised
* Judging from the PFA's wordage it appears that the ruling is the end result of a long line of "indiscretions".
* One wonders why the trustees thought that they could operate above the law
* And finally the fund is administered by Sanlam- who with the large legal resource must have been aware that they were not acting in the best interests of the fund, or themselves. Is there more to this story/ruling than meets the eye?

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