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Employer duty to pay contributions only ceases when a disability claim is registered

An employer’s obligations to pay contributions to a provident fund ceased when the fund registered the member’s disability claim, not when his contract of employment ended, the Financial Services Tribunal has ruled.

The fund member’s employment with Gauteng Coaches (Pty) Ltd was terminated for medical reasons on 30 November 2020.

After Gauteng Coaches advised the Hospitality and General Provident Fund of the member’s retrenchment, the fund reminded the employer twice in December that it had to continue paying contributions to keep the member’s risk cover in place. But Gauteng Coaches did not, contending that, by law, it was only obliged to contribute until the date on which the member’s employment had been terminated.

The member died in March 2020. As result of the non-payment of contributions, his risk cover lapsed, and his beneficiaries forfeited a disability benefit of R452 837 and a funeral benefit of R30 000. His fund credit was R51 787.

His widow complained to the Pension Funds Adjudicator, which found that Gauteng Coaches had failed to abide by section 13A of the Pension Funds Act. It ordered Gauteng Coaches to pay the outstanding contributions to the member’s widow.

In its application to the tribunal for reconsideration, Gauteng Coaches not only argued that its legal obligation to pay contributions were conditional on the member remaining in employment but that the cost of the administration, funeral and risk benefits were the responsibility of the fund’s members.

But the tribunal said the Adjudicator was correct in finding that Gauteng Coaches had disregarded the fund’s rules and the agreement it signed with the fund. It was obliged to continue paying contributions on behalf of the deceased until his disability claim had been registered.

The employer should have applied for a disability benefit within six months from when the disability became evident. If the employer had complied with its obligations, the fund could have assessed the disability application.

The fund specifically advised Gauteng Coaches to continue paying the contributions to keep the member covered for the risk benefits, but the fund had not done this, the tribunal found.

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