As a participating employer in the Fund, it’s crucial to stay informed about your legal obligations under Section 13A of the Pension Funds Act, which requires timely and accurate contributions to your employees’ retirement funds. Non-compliance can lead to severe consequences, including criminal and civil legal action taken against you as required by the law. This article outlines the communications you can expect to receive if there’s a lapse in contribution payments, helping you to understand what is required to ensure that you meet your obligations imposed on you by the law.
Section 13A mandates that employers must deposit contributions to pension funds by the seventh day of the month following the month for which the contributions are due. This, and other legal requirements in the Act, ensures that employees’ retirement savings are managed effectively and securely.
To help you maintain compliance with Section 13A, you will receive a series of communications if discrepancies are detected. Understanding these letters is key to resolving issues swiftly and avoiding further complications.
- Initial reminder letter:
- When you will receive it: Immediately after a missed or late contribution is identified.
- Purpose: To alert you to the non-compliance and remind you of your legal obligations.
- Action required: Review your records, correct the discrepancy, and ensure timely future payments.
- 30-Day Follow-Up Letter:
- When you will receive it: 30 days after the initial reminder, if the issue remains unresolved.
- Purpose: To reiterate the importance of compliance and the potential consequences of continued non-compliance.
- Action required: Address the non-compliance immediately to avoid escalation.
- 60-Day Second Follow-Up Letter:
- When you will receive it: 60 days after the initial non-compliance notice.
- Purpose: To warn of imminent legal and regulatory actions if compliance is not achieved.
- Action required: Take urgent action to rectify the situation and communicate any obstacles to the 13A compliance office.
- 90-Day Final Notice:
- When you will receive it: 90 days following your first notification.
- Purpose: This is a final warning before enforcement actions are taken.
- Action required: Comply within the stipulated time frame or face legal proceedings.
- Legal Action Notice:
- When you will receive it: If there is no compliance following the 90-day final notice.
- Purpose: To inform you that legal proceedings have been initiated.
- Action required: You may consult legal counsel and prepare to respond to legal actions.
Consequences of non-compliance: Failure to comply with Section 13A can lead to fines, criminal and civil legal actions, late-payment interest being levied, damage to your organization’s reputation and possible liability for the company directors or nominated responsible person. It’s vital to take each communication seriously and act promptly. It may also lead to your employees’ lodging complaints at the Pension Funds Adjudicator. In terms of the law, the employer is required to advise the Fund who the responsible person is at the employer, in terms of section 13A (8) of the Act. This person may be held personally liable for unpaid contributions. If the employer has not identified the responsible person in terms of the Act then it is possible that all Directors, in the case of a company or all Members in the case of a Close Corporation may be personally liable for unpaid contributions and late payment interest.
Important Note on Group Risk Benefits:
If you are in arrears with risk premiums, the Group Risk benefit, such as death, disability cover, funeral cover, etc. ceases in terms of the Group Risk policy contracts. Should a claim arise during this time, the Fund will not be in a position to pay the insured members’ benefits. Consequently, members or beneficiaries may be able to sue the employer (possibly also the directors in their personal capacities) for any damages suffered. However, an employer may apply for a suspension of contributions and risk premiums in terms of the Rules of the Fund, with such suspension being subject to Board approval.
Staying compliant with Section 13A is not only a legal requirement but a commitment to the financial security of your employees. By responding promptly and appropriately to each communication, you can ensure that you fulfil your obligations and maintain a trustworthy relationship with your employees and the FSCA.