Friday, November 28, 2008

Risks of Late Pension / Provident Fund Contributions ( RETIREMENT FUNDS )


The Association is aware that certain Employers are in arrears with their contributions to the Retirement Funds, that we administer.

These Employers are advised that they could be placing themselves at considerable risk in terms of the Insured Benefits which are contained in the Retirement Fund elements of the scheme.

If contributions are not up to date and an employee dies suddenly, the Insurance Company will refuse to pay the benefits which otherwise would have been due, e.g. the death benefit, a minimum of two year’s pay and the funeral benefit.

The Employer would then be liable to the deceased employee’s estate for these benefits, which would be due in terms of the contract of employment. The due date for receipt of contributions for the Insured Benefit component of the Retirement Funds, is 7 days after the relevant month end.

The costs could run into many thousands of rands and it would be impossible to pay the premiums in arrears as this would constitute fraud. In addition, Employers are advised that they are obliged to pay interest on overdue contributions.

The requirements of Section 13A of the Pension Funds Act, are quite clear on the penalties that the Administrator must impose on the Employers that pay contributions for their employees late. i.e. by latest, the 7th (seventh) of the next month. If payment has not been received after a 60 day period, the Employer has to be reported to the Financial Services Board. If after 90 days the contributions are still outstanding, the Employer has to be reported to the Public Prosecutor, and charged accordingly.

It is on record that an Employer in the Security Industry, has been jailed for non compliance with Section 13A of the Pension Funds Act.

Employers are advised to ensure that they do not expose themselves to these unnecessary risks.

R.S. Pengelly
Employee Benefits Manager

CONSULT YOUR ASSOCIATION.
WE ARE HERE TO HELP YOU !

No comments: