Pensions adjudicator: I've cut complaints backlog by a third

By Time of article published May 16, 2009

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In the face of criticism about the slow pace at which her office is issuing determinations, the Pension Funds Adjudicator has released figures that indicate she has reduced the backlog of cases by about a third over the past year and dealt with a record number of complaints since taking office.

Despite an increase in the number of complaints to her office, Mamodupi Mohlala, the adjudicator, says her office has reduced the number of files open from 10 182 last year to about 6 500 this year.

Mohlala says that on average her office is receiving between 350 and 450 cases a month, as retrenchments and early retirements are resulting in more people claiming benefits from their retirement funds.

In the year to March this year, Mohlala says her office disposed of 8 207 cases, including 2 232 determinations. Mohlala took up her post in May 2007, and in the two years since then her office has disposed of 12 116 cases - a record for the adjudicator's office, she says.

In an article in a recent edition of IRFocus, the Institute for Retirement Funds' publication, Solomzi Gcelu, a former assistant adjudicator, criticised Mohlala for launching a scorecard for the retirement industry but not having one to rate her own performance.

Gcelu, who is now a senior legal adviser for Metropolitan Life, says in the article that "it is an unfair and one-sided exercise for the adjudicator's office to assess the service or performance levels of other industry role-players while it is not subjected to a similar performance measurement exercise".

He says Mohlala has failed to devise an effective strategy to deal with the backlog of complaints, and despite an increase in the staff at her office, the rate of output from it "is shockingly slow".

Last year, Mohlala introduced a scorecard that will rate retirement funds on the basis of the complaints her office receives and how the funds handle the complaints. The first scorecard is due to be released in September.

The scorecard will report the number and type of complaints lodged against each fund, how long a fund takes to respond to a complaint, the quality of a fund's response, the number of complaints that were subsequently dismissed by the adjudicator's office, and whether or not a fund made any attempts to resolve a complaint.

Mohlala says her office's annual report is its scorecard and the statistics on the cases record her office's success in dealing with the backlog.

She says the additional staff her office now has is yielding a definite return for the office and the public.

Much-needed deputy

Currently, Mohlala is the only person at the adjudicator's office who can sign off on determinations. Provision was made in an amendment to the Pension Funds Act in October 2007 for the appointment of deputy adjudicators who would also be able to sign off on determinations. Deputies could help reduce the office's backlog further.

Gcelu says "for reasons better known to Mohlala, to date no deputy adjudicators have been appointed".

In terms of the Pension Funds Act, the Minister of Finance, after consultation with the Financial Services Board (FSB), is responsible for appointing both the adjudicator and any deputy adjudicators.

Dube Tshidi, the chief executive officer of the FSB, says budgetary provision for the appointment of a deputy adjudicator was made in the 2008/9 financial year, but the FSB did not find a suitable candidate.

Mohlala says she budgeted for two deputies this year, but the allocation was removed from her budget. Tshidi says this was a result of the global financial crisis.

He says provision will be made for the post in the 2010/11 financial year, and the FSB will seek to fill the post when the new financial year starts in April next year.

Conciliation process 'a mess'

To help clear the backlog of complaints, in September last year Mohlala introduced a conciliation process aimed at getting the parties to a dispute to negotiate a settlement under guidance from a facilitator.

In his article, Gcelu says the conciliation programme is being undermined by disorganisation, and the facilitators have an "alarming" disregard for punctuality.

In March, the Pension Lawyers' Association conference heard that facilitators have access to the case files only the morning before the conciliation meeting so that the files do not leave the adjudicator's office.

Mohlala says facilitators are being asked to come in earlier to prepare for cases, and other teething problems are being addressed.

However, she says, the conciliation process is proving to be a very time-efficient dispute-resolution mechanism, and the process has dealt with 1 367 complaints in its first nine months.

Penalty interest

Another measure Mohlala has indicated she may implement to deal with the backlog is to increase the penalty interest levied on funds when they do not comply with the law, their own rules or the precedents set by her office.

Currently, the adjudicator uses an interest rate of 15.5 percent.

Gcelu says increasing the penalty interest levied against funds would not be legally sound.

Mohlala says the Pension Funds Act gives her the right to set the interest rate funds must pay on awards made to complainants.

In his article, Gcelu criticises Mohlala for trying to deal with the backlog of cases by outsourcing to several law firms the investigation of complaints and the drafting of determinations on some of the older cases. He says this cost R1.4 million, but the quality of the work done by these firms was "atrocious".

Mohlala says only 30 percent of the R716 849 that her office spent in the 2008/9 financial year on professional fees went to consultants who worked on the 1 822 older cases, and not R1.4 million. She says some of the consultants' draft determinations were subsequently issued.

Quality of determinations

Gcelu accuses Mohlala of flouting basic legal principles in two of her determinations. In one of these cases, Mthimkhulu versus NBC Holdings, he says the adjudicator acted beyond her jurisdiction.

In this case, the employer never registered the employee on the fund, and Gcelu argues in his article that Mohlala should not have regarded the issue as a complaint that she could deal with in terms of the Pension Funds Act.

But Mohlala says she did have the authority to deal with this matter, because the employer was a participating employer in a pension fund and did not comply with its fiduciary duty to register the member with the fund, despite deducting amounts from his salary in the name of the fund.

Her determinations have found support from Mtendeweka Mhango, a senior lecturer of pension law at the University of the Witwaters-rand, who says the adjudicator is right to interpret the Pension Funds Act broadly in order to prevent an injustice from being committed and to promote fairness in line with the Constitution.

"I believe it was in keeping with her main objective as a pension fund watchdog in issuing a pragmatic decision to award a relief of a withdrawal benefit," he says.

Mohlala says 11 of her determinations have been taken to court on review. Not all the cases have been heard, but of those that have, only one has succeeded.

FUND MUST RE-CALCULATE PAYOUT

The Pension Funds Adjudicator this week ordered a retirement annuity (RA) fund to pay LW Landman, a former member, the few thousand rand he lost out on because the fund calculated his benefit four days before his date of retirement.

Mamodupi Mohlala, the adjudicator, says Sanlam's Central Retirement Annuity Fund's practice of withdrawing members' maturing fund values from the fund early appears to be widespread.

Mohlala asked the fund's trustees to ask Sanlam, the administrator, to re-calculate any benefit calculations it has done for members and former members and to reimburse them if they have received less than they were entitled to receive.

In the ruling against the Central Retirement Annuity Fund, Mohlala ordered the fund to pay R7 765 plus interest into a living annuity of Landman's choice, because the fund had determined his benefit in line with market movements up to June 26, 2006 and not July 1, 2006, the date on which Landman retired. The movements affected the value of his underlying investment in a portfolio linked to the local share market.

Mohlala says that in computing the benefit early, the fund failed to act in accordance with generally accepted actuarial practice, as well as the provisions of the fund's rules, the policy document and the Long Term Insurance Act.

Sanlam sent Landman a letter in May 2006 that showed the illustrative maturity value of his RA as R199 555. However, when Landman retired, he was paid R191 790. He queried the discrepancy and was told it was a result of market movements: the FTSE/JSE All Share index (Alsi) had declined by the same percentage.

The adjudicator's office found that the Alsi had increased slightly between the date on which the illustrative maturity value was determined and the date on which Landman retired.

On closer questioning, Sanlam told the adjudicator that, in order to ensure that its members receive their retirement benefits on the date on which they retire, it calculates their benefits four days before the retirement date, based on the closing values of the relevant investment market from the previous day.

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