Members' fund contributions should not be set off against employers' fund arrears - Lukhaimane

Muvhango Lukhaimane

Deputy Pension Funds Adjudicator Muvhango Lukhaimane has reiterated that the duties of a fund's board shall be to take all reasonable steps to ensure that contributions are paid timeously to the fund in accordance with the Pension Funds Act. Lukhaimane added the fund's board can be held jointly and severally liable for the actions of their mandated agents.

The facts of the case

Complainant MI Moloantoa was a member of the Private Security Sector Provident Fund (first respondent) while in the employ of Mjayeli Security Services (Pty) Ltd (third respondent) from 1 September 2011 until the termination of his services on 30 November 2012.

Following the termination of his services, a withdrawal benefit became payable to him. He said the first respondent had failed to pay a withdrawal benefit because of the third respondent's alleged failure to pay all contributions to the first respondent on his behalf.He was informed by Absa Consultants and Actuaries (second respondent) that he was never registered as a member of the first respondent.

The first respondent submitted that it had the third respondent on its records as a participating employer, having joined as such on 30 April 2007. The first respondent further submitted that the third respondent was non-compliant with its obligations under the Act and its rules. As a result of the third respondent's non-compliance, provident fund contributions were last received in March 2013 and its record has been updated by the second respondent up to March 2011.

The first respondent submitted that the complainant was not registered as its member as no contributions were received on his behalf. Accordingly, no withdrawal benefit was payable to him. The third respondent submitted that the complainant was in its employ from September 2011. He became a member of the first respondent with effect from December 2011 until the termination of his services in December 2012.

During this period the complainant paid provident fund contributions in the amount of R2560.24. The third respondent further submitted that it paid employer contributions on behalf of the complainant totalling the same amount.

The determination

Lukhaimane said in her determination the payment of any benefit due to a member of a fund is regulated by the fund's rules. The third respondent was obliged in terms of the Pension Funds Act and the rules of the first respondent to pay contributions and submit schedules to the first respondent indicating on whose behalf payment is being made.

"Such contributions must be paid directly to the fund in such a manner as to have the fund receive the contributions not later than seven days after the end of that month for which such contributions are payable.

"On 31 May 2013, this Tribunal had a telephonic discussion with the first respondent wherein the latter set out to elaborate on this point.

"It appears that the second respondent's membership data system is set up in such a manner as to prevent the upload of current provident fund contributions for any given month if the employer is in arrears for the preceding months or years, as the case may be.

"To circumvent this, the second respondent uses the current contributions to offset the arrears in order to bring the employer up-to-date, as it were. Hence the submission that contributions from the third respondent were last received in March 2013 but its record has been updated up to March 2011. "

Lukhaimane said owing to the high staff turnover in the private security industry, the foregoing practice was almost always to the prejudice of the new employees.

"The second respondent credits the current contributions towards the individual accounts of those employees in respect of who the employer is in arrears and not necessarily those whose names appear on the contribution schedules.

"As a result, a new employee may not get registered as a member of the fund as there may be no contributions left to allocate after the offset.

"If the employee's services are terminated before the employer's record is fully updated, as was the case in this complaint, no benefit will be payable to him.

"This practice flies in the face of the very idea of retirement funding. It is a gross violation of section 13A of the Act and the rules of the first respondent, and must to be strongly discouraged."

Preventing expediency trumping the law

She urged the trustees of the first respondent, in pursuance of their statutory obligations, to prevent what appears to be a case of "expediency trumping the law".

"The duties of a board shall be to take all reasonable steps to ensure that contributions are paid timeously to the fund in accordance with this Act.

"Furthermore, members of the board of the fund can be held jointly and severally liable for the actions of their mandated agents."

Lukhaimane said that barring the period September 2011 to November 2011, she was satisfied that the first respondent was in receipt of the complainant's provident fund contributions.

She ruled that the complainant must be placed in the position he would have been in had the third respondent regularly paid all the contributions due and the first respondent had paid the benefit it is holding on his behalf.

She also forwarded her determination to the Registrar of Pension Funds to follow up on the second respondent's manner of allocating contributions as the second respondent carried on business as an administrator of funds, other than the first respondent.