Retirement funds should ensure employers are aware of their obligation to pay contributions, even while their employees are absent from duty. This was said by the Financial Services Tribunal when it upheld a determination by the Pension Funds Adjudicator that an employer had to pay a death benefit recalculated to take account of outstanding contributions.
The deceased’s beneficiaries complained to the Adjudicator in July last year about the amount of the death benefit (R41 448) allocated by the Metal Industries Provident Fund.
The fund did not pay an insured death benefit. The deceased was not a contributing member of the fund.
The Adjudicator found that the deceased’s employer, Quad Racks & Cables, had, contrary to section 13A (“Payment of contributions and certain benefits to pension funds”) of the Pension Funds Act, not paid contributions on his behalf in April and May 2019. The fund member was on sick leave from April until his death at the end of May.
In February this year, the Adjudicator ordered the fund to calculate the deceased’s outstanding death benefit, plus late-payment interest, and ordered Quad Racks to pay this amount to the fund, which would pay the beneficiaries.
In its application to the tribunal, Quad Racks did not contest that it had not paid contributions on behalf of the member for April and May 2019.
However, it said the fund had not informed it of the fund’s rules and the issues that may arise from the temporary absence of employees. It had also not been informed of the risk of not submitting its contributions towards the deceased’s risk cover.
Quad Racks wanted the tribunal to order the fund to pay the death benefit to the family, whereafter it would pay the outstanding contribution and late-payment interest.
But the tribunal said the Adjudicator’s determination was in accordance with the Pension Funds Act and the fund’s rules.
It said the facts indicated that the applicant failed to pay the fund the deceased’s risk cover. If the contributions been made correctly, the beneficiaries would have received a substantially higher benefit. Quad Racks, as the employer, was liable to compensate the beneficiaries, because its failure to make monthly contributions to the fund resulted in the fund incorrectly paying a lower benefit.
The tribunal said it was more than likely that it was not the first instance where a company failed to make monthly contributions while an employee was absent from active duty, nor will it be the last. The fund should ensure the applicant and other companies that fail to make monthly contributions are made aware of their obligations in terms of the fund’s rules.