PFA Ruling: Duty of employers to ensure their employees remain members of compulsory pension funds

20 May 2008 Pension Fund Adjudicator - Mamodupi Mohlala

The adjudicator today issued an important ruling concerning membership of employer-based pension funds in Mabale v Feedmix Provident Fund and Two Others.

The complainant is a permanent full-time employee of the second respondent and by virtue of his employment he was a member of the respondent fund until March 2000. In early 2000 the complainant and fellow employees informed the second respondent that they wanted to join another, unnamed, pension fund. After initially rejecting the employees’ demands, the second respondent eventually conceded following threats of industrial action by its employees. The complainant and other employees then “resigned” from employment and the first respondent paid them a withdrawal benefit. The employees were then “re-employed” from 1 April 2000. In March 2004 some of the employees, including the complainant, indicated that they wanted to join an umbrella provident fund. The second respondent refused to accede to this arrangement because the majority of employees wished to remain with the first respondent. The complainant’s main complaints were that the second respondent be compelled to allow him to join a pension fund of his choice and secondly, since he has been financially prejudiced since 2000 because he has not belong to a pension fund, he prays that he either be paid all arrear contributions or he be allowed to transfer these contributions to a pension fund of his choice.

As regards the complaint about fund choice by the complainant the adjudicator noted that employers are presently not compelled to have pension funds for their employees. Thus, it is the employer’s prerogative to decide whether to establish, or to join, a pension fund or not. Therefore, the second respondent cannot be compelled to participate in a pension fund if it does not want to do so and this leg of the complaint was dismissed.

The second leg of the complaint concerned the complainant’s non-membership of the company pension fund since April 2000 while in the permanent full-time employ of the second respondent.

Firstly, the adjudicator ruled that the portion of the complaint relating to the complainant’s fund membership between April 2000 to February 2002 was time-barred in terms of section 30I. This was so because the complaint was only lodged in March 2005 and more than three years had elapsed since the cause of action had arisen without good cause being provided for the delay in lodging a complaint with this tribunal.

The adjudicator took cognizance of the fact that the complainant did not want to belong to the first respondent and threatened industrial action if he, and some other employees, remained members. The adjudicator also noted that the complainant and his colleagues only provided details of an alternative fund some four and a half years after they agreed to do so. However, the law and the rules of the respondent fund are paramount.

In terms of the first respondent s’ rules, any employee in the full-time permanent service of the second respondent and who is between the ages of 18 and 65 years must become, or remain, a member of the first respondent. The complainant was a full-time permanent employee between the ages of 18 and 65. Thus, membership of the first respondent was not voluntary but compulsory for the complainant. The rules also impose a duty on the second respondent to ensure that eligible employees are members of the first respondent. Since the complainant was still in employment he ought to have remained a member of the first respondent. This also means that the complainant cannot receive any benefit payment at present because no benefit is due to him.

The adjudicator found that the second respondent failed to ensure that the complainant remain a member of the first respondent and ordered the second respondent to pay to the first respondent all arrear employer contributions in respect of the complainant from March 2002 onwards. The second respondent was also ordered to pay all fund returns on the arrear contributions. Since the complainant also had to make contributions to the first respondent, the complainant was also ordered to pay to the first respondent all arrear member contributions from March 2002 onwards.

PFA - Mamodupi Mohlala (pictured above right)

Click here to read the full determination (PDF file 83kb)



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