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Beneficiaries to get pension fund payouts after employer defaults

Muvhango Lukhaimane

Muvhango Lukhaimane

Published Feb 17, 2022

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CAPE TOWN - In a case that illustrates the devastation of employers’ failure to keep up to date with their pension fund contributions, two complainants – a daughter and a son – have failed in their respective bids to get risk benefits to be paid when their parents passed away.

The deceased were members of the funds by virtue of their employment with the Maluti-A-Phofung Municipality in the Free State.

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One employee, a woman, passed away on January 1, 2018. The other, a man, passed away on September 14, 2018.

Their daughter and son, respectively, complained to the Pension Funds Adjudicator (PFA), Muvhango Lukhaimane, that the deceased’s risk benefits had not been paid to their beneficiaries.

Responding to Lukhaimane, the funds submitted that the employees commenced participation on September 1 and September 14, 2012, respectively.

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A transfer from the Maluti-A-Phofung Retirement Pension Fund to the Sanlam Umbrella Pension Fund had been approved.

“The funds stated that due to the employer’s failure to timeously pay all contributions owing to the funds in terms of section 13A of the Act, the funds followed due processes and terminated the employer’s participation on February 27, 2018 with effect from October 1, 2017,” the office of the PFA said.

Despite the employer at a later stage paying the arrears contributions, “as the risk benefits terminated on October 1, 2017 the special rules applicable to the employer had to be amended to remove these risk benefits”.

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The funds submitted that in terms of the special rules and general rules of the funds, the only benefit payable to the beneficiaries as a result of the deceased’s deaths consisted of the deceased members’ share in the funds. The deceased’s net benefits were distributed to their beneficiaries.

In her ruling, Lukhaimane said: “At the dates of the deaths of the deceased, the reinsured group risk benefits under the funds were no longer in force, as the cover terminated on October 1, 2017.

“Therefore, although the employer confirmed that it is liable for any risk benefits due to members and beneficiaries for the period October 2017 to August 2019, it cannot be held liable for a fund benefit that was no longer provided for in the rules, and the special rules applicable to it.”

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She advised the beneficiaries to claim directly from the municipality, “if indeed it undertook to continue providing the benefits outside of the rules”.

Attempts to reach the municipality for comment were unsuccessful.

Cape Times

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