PFA lays into fund for holding back death benefit

The Pension Funds Adjudicator has lambasted a pension fund for adopting a don’t-care-a-damn attitude regarding the distribution and payment of a death benefit.

Muvhango Lukhaimane ordered the Engineering Industries Pension Fund (first respondent) to pay Ms De Harmse, a widow from Krugersdorp, the full death benefit plus punitive damages in the form of late payment interest of 9% p.a. from 29 March 2014 to date of payment. 

The complainant’s husband was employed by Willberg Steel Construction (Pty) Ltd from 2005 until his death on 29 March 2013. 

She said that on 13 May 2013, she submitted her claim for the payment of the death benefit and received an acknowledgement of receipt. She said she did not receive any correspondence or update regarding the payment of the death benefit. 

She has been waiting for almost three years for the payment while she is living on an old age grant which is not sufficient.

She submitted that the Metal Industries Benefit Funds Administrators (Pty) Ltd(second respondent) did not respond to her correspondence when she called or sent electronic mails. 

In its response to the Office of the Pension Funds Adjudicator, the second respondent submitted on 9 October 2015 that the benefit was being audited and the complainant would be provided with further information when this was finalised. 

On 12 January 2016, the second respondent submitted that the complainant’s file had been taken for payment and she would receive the first 50% of the benefit of R617 060.20 before the end of that week. 

On 4 March 2016, the second respondent submitted a copy of the payment letter dated 28 January 2016 addressed to the complainant. 

The letter stipulated that a lump sum death benefit of R714 849.81 had accrued and would be awarded to all beneficiaries of the deceased (less taxes and any advances) as determined by the board of the first respondent in terms of section 37C of the Act. 

It submitted that the complainant (and her minor child) had been provisionally awarded a sum of R308 530.10. A balance of R308 530.10 remained for later distribution. 

In her determination, Ms Lukhaimane said: “For over a period of 30 months after the death of the deceased, no benefit had been paid to the complainant and eventually when payment was made in January 2016, only half of the benefit allocated to the complainant was paid. 

“It is clear from the submissions that the second respondent failed in its duty to distribute the death benefit within 12 months of the date of death in terms of section 37C(1)(a) of the Act. 

“It also appears from the submissions that there was no genuine reason why the death benefit could not be paid earlier as it already had the complainant’s claim in May 2013 and the entire benefit was allocated to the complainant. 

“This Tribunal finds that the delay in the payment of the death benefit is unjustifiable and secondly, the continued retention of half of the complainant’s lump sum death benefit is unlawful in that it is not sanctioned by rule 6(i) of the first respondent’s rules or section 37C(1)(a) of the Act.” 

She ruled that the complainant must be placed in the position she would have occupied had the first respondent paid the death benefit within 12 months of the date of the deceased’s death. 

“The first respondent should pay the outstanding amount of the death benefit to the complainant together with late interest at the rate of 9% per annum computed from 29 March 2014 to date of payment and provide the complainant with a breakdown thereof,” Ms Lukhaimane ruled. 

She added: “This Tribunal takes note of the cavalier attitude in which the complainant’s claim was dealt with and in particular regarding the time it took the first respondent to complete the investigation that is required in terms of section 37C(1) of the Act, which is 12 months. 

“The first respondent took more than 30 months to decide that the complainant was the only beneficiary and after deciding to allocate the full benefit to the complainant, it only paid half of the allocated benefit and retained the other half for no justifiable reason. 

“Thus, the board of the first respondent failed to execute its fiduciary duty towards the complainant in respect of an accrued death benefit and on its duty to apply the rules and the law as it is required in terms of section 7C(f) of the Act. 

“For this reason, punitive damages in the form of late payment interest on the full death benefit shall be ordered in favour of the complainant.”