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At the IRFA conference held in September 2017, the adjudicator warned that she plans to impose compensation orders where employers and funds prejudice members by for example the late payment of benefits. This message has now been echoed by the Minister of Finance in a message in the 2016/17 annual report of the Office of the Pension Funds Adjudicator (OPFA). (The press release can be read in the Industry update of the Consultant Toolkit).

The Sanlam Umbrella Fund received two of such compensation orders recently.

  1. An employer who did not process a member’s withdrawal benefit was ordered to compensate the member in an amount of R5 000 for prejudice suffered as a result of the unreasonable and unlawful withholding of the benefit.
  2. An employer who requested the fund to withhold payment in terms of section 37D while he pursued a conviction in the court was ordered to pay compensation in an amount of R15 000 when the criminal case did not yield the desired results and the employer did not institute civil action timeously. This determination may be taken on appeal.

In each case the order is made against both the employer and the fund. If the fund was in the wrong the order may not be deducted from member fund credits and where appropriate the administrator, PO or individual officer may be required to make payment.

The fund will launch an investigation to ensure that all stakeholders are properly informed and are operating within the requirements of the law. Consultants are requested to be aware of these practices and ensure their clients are informed about the risks.

  • Deduct and timeously pay contributions in terms of the special rules

An incorrect interpretation of the special rules by the Employer can have significant consequences. This is best discussed and signed off once a year at the joint forum meeting.

  • Process and sign withdrawal benefits as and when required.

Employers are required to process and sign withdrawal benefits timeously. The processing of withdrawal benefits may not be delayed in an attempt to secure payment of outstanding loans by existing members.

It is not legally possible for an employer to force the member to deduct outstanding loans from the  withdrawal benefit.

If the employer believes / suspects that he suffered a loss as a result of the theft, fraud, dishonesty or (dishonest) misconduct of the employee and requires the fund to withhold a part of the benefit, the employer must submit a written acknowledgment of debt or evidence of a prima facie case that he is pursuing through the courts for the trustees’ consideration.