PFA: Pension fund rapped for making widow wait six years for death benefit payment

A provident fund and its administrator have been blasted by the acting Pension Funds adjudicator for a six-year delay in paying a death benefit and which was blamed on IT problems.

Dr Elmarie de la Rey said that as a result of the conduct of the National Bargaining Council for the Road Freight Industry Provident Fund (first respondent) and RF Administrators (Pty) Ltd (second respondent), the dependents of JH Mthabela were being prejudiced by the undue delay in the payment of the death benefit.

She said conduct of the respondents was unacceptable and in breach of the Act. She has forwarded a copy of the determination to the Registrar of Pension Funds as well as the Head of the Surveillance and Enforcement of the Financial Services Board for their attention and further action.

Mrs KG Mthabela of Wasbank was concerned about the unnecessary delay in the payment of a death benefit following the death of her husband who was a member of the first respondent until the date of his death.

Claim documents had been submitted to the second respondent several times. The second respondent finally advised on 21 July 2011 that it was not in a position to process payment due to a problem with its Information Technology (IT) system that has resulted in it having to wait for a tax directive (IRP3) from the South African Revenue Services (Sars).

The respondents failed to submit a comprehensive response to the complaint despite several requests to do so since 4 July 2008.

Mr F Bothma from the second respondent’s offices requested claim documents on 25  June 2010 and promised to investigate the matter. Thereafter, the second respondent  requested identity documents and affidavits, which had been submitted to the second  respondent by the complainant and the employer several years previously.

Mrs Z Ndlangamandla of the second respondent submitted that she “was struggling” to  obtain an IRP3 from Sars on 5 July 2011, 21 July 2011 and 3 August 2011 due to IT problems.

Furthermore she advised that she had forwarded correspondence to the relevant individuals handling the matter. No response was received from her by the return date of 15 August 2011. At the time of this determination (30 September 2011) there was still no response from the second respondent confirming payment of the death benefit.

In her determination, Dr De la Rey said the Act placed a duty on the board of  trustees to identify the beneficiaries of a deceased member and also vested the board with  discretionary powers regarding the proportions and manner of distributing the proceeds of a  death benefit.

“The Act gives the board 12 months to settle death benefit claims. The board does not  have to wait for 12 months to lapse before making payment if it is satisfied that it has taken  all reasonable steps to trace and identify dependants. 

“However, the board cannot take an unreasonably long time following the member’s death  to finalise its investigation and make payment. 

“In this complaint, the deceased passed away on 8 July 2005, but a death benefit has not been  paid to his dependants to date.

“Thus, the submissions indicate that a period of six years has lapsed since the deceased’s death, but no death benefit has been distributed to his dependants by the first respondent despite it being informed on several occasions that a death benefit is due and payable,” Dr De la Rey said in her determination.

She added that the second respondent’s submission that the delay in payment was caused by IT problems was unacceptable “because the payment should have been finalised by 8 July 2006 and the process of obtaining IRP3 from Sars is normally easy and expeditious”.

“The respondents have not provided any plausible reasons for the inordinately long delay in paying the dependants, which is contrary to section 37C of the Act.

“Moreover, the conduct of the first respondent contravenes the Act, which requires a board of trustees to ensure that it maintain proper control systems.

“The board of the first respondent also failed to act with due care, diligence and good faith in dealing with the deceased’s death benefit as provided in the Act.”

The first respondent was ordered to pay the death benefit to the deceased’s dependants, together with interest thereon at 15.5% per annum computed from 8 July 2006 until the date of payment within 14 days of 30 September 2011.