Some municipalities putting pension benefits at risk

01 March 2019 Pension Funds Adjudicator
Muvhango Lukhaimane, Pension Funds Adjudicator

Muvhango Lukhaimane, Pension Funds Adjudicator

It is unacceptable that some municipalities fail to pay contributions to pension funds in respect of employees, despite the amount being deducted from the salary, said the Pension Funds Adjudicator.

Muvhango Lukhaimane said the issue of non-compliance by municipalities with regard to payment of contributions affected members in terms of their pension or provident fund investments and risk benefits.

She said such benefits may not be paid due to outstanding contributions.

Ms Lukhaimane was commenting in a determination concerning a municipality that had failed to pay contributions on behalf of its employees to the pension fund in good time.

The complainant TP Hlongwane claimed that Maluti-A-Phofung Local Municipality (fourth respondent) had failed to pay all contributions on his behalf to Phuthaditjhaba Municipality Pension Fund (first respondent) and National Fund For Municipal Workers (third respondent), which affected the quantum of his fund credits.

The complainant further stated that the first respondent had not provided him with annual benefit statements and did not explain the issue to members or take any action.

The second respondent submitted that the first respondent had experienced serious challenges in obtaining arrear contributions from the fourth respondent.

On 31 October 2017, it wrote to the chairperson of the board to state that contributions were in arrears and requested the chairperson to address the matter with the fourth respondent.

After the fourth respondent failed to remedy the matter, the Principal Officer of the first respondent opened a case with the South African Police Service.

On 6 February 2018, a formal member communication detailing the situation was drafted for distribution to members. The matter was also reported to the Financial Sector Conduct Authority 14 February 2018.

The second respondent indicated that on 6 June 2018 and 23 July 2018, it drafted a letter of demand informing the fourth respondent that if contributions were not paid it would take legal action.

Letters were also drafted to update members of the situation whereby the fourth respondent was in arrears with contributions for the period November 2017 to January 2018 and March 2018 to June 2018.

A settlement agreement dated 27 March 2018 was the only response received from the fourth respondent in which it undertook to pay the arrear contributions in relation to members who were dismissed, resigned or passed away by June 2018 and the balance would be rectified thereafter.

The second respondent confirmed that the fourth respondent paid all contributions up to June 2018 on 24 July 2018. However, it averred that late payment interest on the arrear contributions was outstanding. It concluded that benefit statements would be finalised once the reconciliation of contributions received was completed by no later than 30 September 2018.

The third respondent confirmed that the fourth respondent had not been compliant with section 13A of the Act as it did not pay contributions timeously or not at all.

The third respondent submitted that annual benefit statements were sent to members at the end of August every year and was in the process of finalising same. The benefit reflected on a benefit statement would only be for contributions actually received.

In her determination, Ms Lukhaimane said while the complainant had stated that the first respondent failed to take legal steps against the fourth respondent for its non-compliance with regard to the payment of contributions, the first respondent had in fact engaged the fourth respondent on several occasions regarding the arrear contribution and also reported the matter to the FSCA on 14 February 2018.

As a result of the steps the first respondent took, the fourth respondent subsequently paid the arrear contributions up to December 2018. The first respondent continued to engage the fourth respondent regarding the outstanding late payment interest.

“This Tribunal would like to indicate that it is unacceptable that municipalities, like the fourth respondent, can continue to operate without paying salaries or contributions in respect of employees.

“The issue of non-compliance by municipalities with regard to payment of contributions affects members in terms of their pension or provident fund investments and risk benefits that may not be paid due to outstanding contributions,” she said.

The first respondent was ordered to provide the complainant with his latest benefit statement - and a benefit statement annually thereafter as long as his membership subsists.

The fourth respondent was ordered to pay the first respondent the complainant’s outstanding late payment interest in the amount of R2 520.38. The fourth respondent was also ordered to pay the third respondent the complainant’s outstanding late payment interest.

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