Fund can de­lay pay­ing ben­e­fit while crim­i­nal charges are in­ves­ti­gated

Weekend Argus (Saturday Edition) - - PERSONALFINANCE - STAFF RE­PORTER

A re­tire­ment fund is en­ti­tled to de­lay pay­ing out a with­drawal ben­e­fit pend­ing the out­come of a crim­i­nal case into whether a mem­ber’s for­mer em­ployer suf­fered dam­ages as a re­sult of the mem­ber com­mit­ting fraud, theft, dis­hon­esty or mis­con­duct. How­ever, the fund can­not ex­er­cise this right un­rea­son­ably or in­def­i­nitely.

This prin­ci­ple was high­lighted by Mu­vhango Lukhaimane, the Pen­sion Funds Ad­ju­di­ca­tor (PFA), in a de­ter­mi­na­tion handed down re­cently.

“Mr IT”, a mem­ber of the San­lam Um­brella Prov­i­dent Fund, com­plained to the ad­ju­di­ca­tor that the fund re­fused to pay his with­drawal ben­e­fit af­ter he re­signed from CTS Lo­gis­tics on Oc­to­ber 31, 2011. Shortly af­ter he re­signed, a case of fraud and theft was opened against him and sev­eral other em­ploy­ees. How­ever, Mr IT said the case was with­drawn in 2015.

In its re­sponse to the com­plaint, San­lam Life In­sur­ance, which ad­min­is­ters the fund, said the mat­ter has not been dis­missed. It said that, be­cause the mat­ter is com­plex, it has taken time for the case to start. San­lam pre­sented the PFA’s of­fice with an email – dated Jan­uary 19 this year – from the Na­tional Pros­e­cut­ing Au­thor­ity stat­ing that it has “ev­ery in­ten­tion” to con­tinue with Mr IT’s pros­e­cu­tion.

In its sub­mis­sion to the PFA’s of­fice, the prov­i­dent fund said that, shortly be­fore Mr IT re­signed, CTS in­formed the fund that it had be­come aware that Mr IT had al­legedly de­frauded the com­pany of R4 mil­lion. CTS laid a charge against him. CTS asked the prov­i­dent fund to with­hold Mr IT’s with­drawal ben­e­fit in terms of sec­tion 37D of the Pen­sion Funds Act. This sec­tion em­pow­ers a re­tire­ment fund to deduct from a mem­ber’s ben­e­fit any amount rep­re­sent­ing the dam­ages suf­fered by his or her em­ployer be­cause of dis­hon­esty, theft, fraud or mis­con­duct. (This pro­vi­sion was echoed in the rules of the prov­i­dent fund.) How­ever, sec­tion 37D at­taches a con­di­tion to with­hold­ing a mem­ber’s ben­e­fit: ei­ther the em­ployee must have ad­mit­ted li­a­bil­ity in writ­ing or a judg­ment must have been ob­tained in a court of law.

Mr IT had nei­ther ad­mit­ted li­a­bil­ity nor had a judg­ment been ob­tained against him, and Lukhaimane said the out­come of the com­plaint de­pended on whether it was nev­er­the­less law­ful for CTS to with­hold the ben­e­fit.

In her de­ter­mi­na­tion, she says there is noth­ing in the fund’s con­duct to sug­gest that it is act­ing out­side the scope of its pow­ers in sec­tion 37D by with­hold­ing Mr IT’s ben­e­fit pend­ing the fi­nal­i­sa­tion of the crim­i­nal case against him.

She says there is no in­di­ca­tion that the fund or its ad­min­is­tra­tor is un­duly de­lay­ing the fi­nal­i­sa­tion of the pros­e­cu­tion. Lukhaimane quoted from a de­ter­mi­na­tion handed down by the PFA in 2000 ( Sayed-Es­sop v Non-Fer­rous Metal Works Pen­sion Fund and An­other), in which it was held that, where the de­lay in pros­e­cut­ing the mem­ber is not the fund’s or the em­ployer’s fault, it was not un­rea­son­able to with­hold the ben­e­fits for two years.

“There­fore, the with­hold­ing of the com­plainant’s ben­e­fit is not un­rea­son­able, con­sid­er­ing that the mat­ter is com­plex and the com­plainant has re­quested time to make his rep­re­sen­ta­tions.”

The ad­ju­di­ca­tor added that the power to with­hold must be ex­er­cised rea­son­ably and not in­def­i­nitely, and the fund has a re­spon­si­bil­ity to mon­i­tor the mat­ter to en­sure that Mr IT is not prej­u­diced.

Lukhaimane dis­missed the com­plaint.

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