FSCA names 3 262 employers with retirement fund contributions in arrears

The FSCA has named 3 262 employers with retirement contributions in arrears for more than four months. Failure to pay over contributions as required is not only a contravention of the Pension Funds Act, but also causes prejudice and unfair outcomes for members. Some employers are more than 252 months in arrears.

While members’ retirement benefits are compromised, other benefits, such as risk benefits, are also affected. If the employer does not pay over contributions for three months, the insurer will repudiate the claim on the basis of outstanding premiums and the dependents, in the case of a death benefit, will not be paid the insured portion of the death benefit payable from the fund.

The FSCA (Financial Sector Conduct Authority) published FSCA Communication 21 of 2023, which contains the names of employers with arrear contributions, contravening section 13A of the Pension Funds Act that prescribes how contributions and other benefits must be paid to a retirement fund.

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The publication aims to inform members of these retirement funds and relevant stakeholders. The FSCA communicated to the industry its intention to issue this publication in June and requested retirement funds to inform participating employers.

According to the FSCA it received reports of a total of 5 430 employers who were in arrears by 30 April 2023 and 28% had contributions in arrears for one month, 24% for two to 12 months, 23% for 13 to 60 months and 25% for five or more years. The publication reflects employers who have outstanding contributions for a period of 4 or more months.

Employers have seven days after the end of a period to pay the contributions prescribed in terms of the retirement fund rules to a retirement fund.

Municipalities and private sector companies are the culprits

The FSCA’s preliminary statistics indicate that municipalities are in arrears with R1 billion, while private sector companies have approximately R6 billion in arrear contributions. While it is public knowledge that municipalities faced financial difficulties and the effects of Covid-19 on the economy, the FSCA says employers still have an obligation to their employees to pay over-deducted contributions and employers’ contributions to the retirement fund as prescribed by the act.

The FSCA points out that the boards of retirement funds must recover outstanding contributions from employers by using the various avenues available. In terms of Conduct Standard 1 of 2022, that sets out the requirements for the payment of pension fund contributions, boards of retirement funds are required to report material contraventions to the affected members and the FSCA.

Where the contravention persists for a period of 90 days, boards are required to approach the South African Police Service to charge the employer for contravening the act. The FSCA is also continuing to engage with the relevant authorities to ensure that the criminal element of this contravention is effective, as well as boards and, where possible, the affected employers.

The FSCA encourages affected members to approach their employers first before approaching the relevant retirement fund.

People can find the list here.