Pension Fund Adjudicators double blow
On the 17 January 2007 the Pension Funds Adjudicator (PFA) released a determination in a case involving an employer's failure to make payments to a provident fund. The Adjudicator ruled in favour of the complainant and ordered the employer to pay the monies due to the complainant had the transgression not taken place.
The PFA has 304 similar claims on its books. All of these cases relate to the non-payment of contributions to the fund where deductions have been taken from employees. In light of the serious nature of these cases, the Adjudicator took the additional step of reporting its ruling to the prosecuting authorities. The regulator, the Minister of Labour and the Minister of Finance were also informed of the ruling.
A 'cut-and-dried' case
The facts presented in this case were simple enough. The complainant was employed by Security Wise in June 2004. In June 2005, Security Wise joined the Private Security Sector Provident Fund, to which Mr Mali began contributing by way of a deduction from his salary. Mr Mali's contract of employment was subsequently terminated in November 2005.
When Mr Mali attempted to claim his fund withdrawal benefit, Private Security Sector Provident Fund refused payment due to outstanding contributions by the employer. The employer had only made payment for June and July 2005 despite making regular deductions from the complainant's salary. Mr Mali complained to the Adjudicator in an attempt to receive the withdrawal benefits owed him.
Two respondents were named in this case. The first was the complainant's employer, Nabielah Trading CC t/a Security Wise. The second the provident fund which the employer joined, namely Private Security Sector Provident Fund.
Determining jurisdiction
Mr Lazarus Motaung, of NBC Holdings (Pty) Limited responded in his capacity as the Fund's administrator. An excerpt from the determination summarises Mr Motaung's views as follows:
"On the merits, Mr Motaung says the majority of complaints directed against the Fund are about the non-payment of benefits from the fund. This he says arises mainly from the failure of participating employers to pay over contributions to the fund despite having deducted the same from the members' salaries. Another factor which contributes to the non-payment of benefits is the failure of participating employers to submit claim forms to the fund when a member leaves the employer's service."
A large part of this determination went to establishing whether the Adjudicator could rule on complaints directed at the fund in question. After considering the response from the second respondent, and giving due consideration to the provisions of the Act, the Adjudicator stated:
"I am thus satisfied that the provisions of this Act, including Chapter V, apply to this fund, and that members of this fund can lawfully lodge complaints (as defined) with this Tribunal."
Compensating the complainant
The Adjudicator ordered the employer to compensate the complainant, and to make good on outstanding payments to the fund.
To facilitate the ruling, the fund was ordered to determine what the value of the payment to Mr Mali would have been, had all contributions to the fund been paid correctly and these amounts invested in the fund portfolios. The employer was ordered to pay this amount with interest at the rate of 15.5% per annum from December 2005.
Further to this, the employer was ordered to make good on the fund contributions for the period August 2005 to November 2005, with interest at 20% per annum.
Editor's thought:
If an employer makes deductions from an employee for a specific purpose they have an obligation to apply the funds accordingly. To make matters worse, this employer failed to offer any response to the Adjudicator to explain its actions.
