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PFA dismisses claims for the death benefits to be paid

16 February 2022 The Office of the Pension Funds Adjudicator (OPFA)
Pension Funds Adjudicator, Muvhango Lukhaimane

Pension Funds Adjudicator, Muvhango Lukhaimane

In a case that illustrates the devastation of employers’ failure to keep up to date with contributions, two complainants - a daughter and a son - have failed in their respective bids to get risk benefits to be paid when their parents passed away.

The deceased were members of the funds by virtue of their employment with the Maluti A Phofung Municipality. One employee, a woman, passed away on 1 January 2018. The other, a man, passed away on 14 September 2018. Their daughter and son respectively complained to the Pension Funds Adjudicator, Muvhango Lukhaimane, that the deceased’s risk benefits had not been paid to their beneficiaries.

Responding to Ms Lukhaimane, the funds submitted that the employees commenced participation on 1 September 2012. A transfer in terms of section 14 of the Act from the Maluti-A-Phofung Retirement Pension Fund to the Sanlam Umbrella Pension Fund and from the Maluti-A-Phofung Retirement Provident Fund to the Sanlam Umbrella Provident Fund had been approved.

The funds stated that due to the employer’s failure to timeously pay all contributions owing to the funds in terms of section 13A of the Act, the funds followed due processes and terminated the employer’s participation on 27 February 2018 with effect from 1 October 2017.

The funds informed the employer and the members that the reinsured group risk benefits (such as death and disability benefits) were no longer in force.

The funds submitted that the employer requested that the termination of its participation be cancelled but this was refused.

The funds said that in April 2018 and May 2018 the employer commenced payment of the arrear contributions owed to the funds from June 2017. Contributions up to 30 September 2017 were received in respect of the deceased and invested. As the risk benefits terminated on 1 October 2017, the special rules applicable to the employer had to be amended to remove these risk benefits. The funds submitted that the employer’s special rules were amended with effect from 1 October 2017 to remove all risk benefits.

The funds submitted that the contributions due by the employer to the funds from October 2017 until the deceased’s dates of death, were received from the employer between September 2018 and October 2018 and duly invested on the deceased’s records and were included in the full contribution history.

The funds submitted that as at the dates of the deaths of the deceased, the reinsured group risk benefits under the funds were no longer in force as the cover terminated on 1 October 2017. Further, it was also duly removed from the special rules applicable to the employer.
The funds submitted that in terms of the special rules and general rules of the funds, the only benefit payable to the beneficiaries as a result of the deceased’s deaths, consisted of the deceased members’ share in the funds. The deceased’s net benefits were distributed to their beneficiaries in accordance with section 37C of the Act. The complainants’ portions were paid into their bank accounts.

In her ruling, Ms Lukhaimane said: “At the dates of the deaths of the deceased, the reinsured group risk benefits under the funds were no longer in force as the cover terminated on 1 October 2017.

“Therefore, although the employer confirmed that it is liable for any risk benefits due to members and beneficiaries for the period October 2017 to August 2019, it cannot be held liable for a fund benefit that was no longer provided for in the rules and the special rules applicable to it. The beneficiaries should claim directly from the municipality if indeed it undertook to continue providing the benefits outside of the rules.

“The deceased’s beneficiaries were paid death benefits in terms of the rules of the fund. No further benefits are due and payable to them. The complaints are hereby dismissed,” said Ms Lukhaimane.

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