THE IMPACT OF COVID-19 VIRUS ON SOUTH AFRICAN RETIREMENT FUNDS

THE IMPACT OF COVID-19 VIRUS ON SOUTH AFRICAN RETIREMENT FUNDS

THE IMPACT OF COVID-19 VIRUS ON SOUTH AFRICAN RETIREMENT FUNDS

With South Africans only days into the 21-day lockdown, the impact of the COVID-19 virus and the state of disaster declared by President Ramaphosa to combat the effects thereof will be felt by all employers and employees in the months or even years to come.

Given the possibility of negative impacts on the economy, trustees of pension funds need to focus on their fiduciary duties. Trustees must ensure that they are well-advised on the possible impact of COVID-19 on their investments and seek to mitigate any loss to assets under investment. The mitigation must include advice from experts on best practice considering the pandemic.

What are the rights of the Fund and employer responsibilities?

Section 13A of the Pension Funds Act (PFA) defines the rights of the Fund and the responsibility of the employer as follows:

  • The employer must pay the contributions to the Fund by the 7th day after the end of the month in respect of which the contributions were payable.
  • The contribution payment must be paid directly into the Fund’s bank account and must reflect therein by the 7th day after the end of the month in respect of which the contributions were payable.
  • Penalty interest is payable on arrear contributions by the employer at the prescribed rate.
  • The Employer must provide the Fund with a monthly reconciliation of its member data which agrees to the contribution payment made, by the 15th day after the end of the month in respect of which the contributions were payable.
  • The PFA defines the minimum information that the Employer must provide in the monthly returns.
  • The PFA also provides a reporting procedure that the Funds are obliged to follow should the Employer not pay over contributions in the prescribed period.

Section 13A of the PFA compels the employer to pay the retirement fund contributions deducted from an employee’s salary as well as the employer’s contribution to the retirement fund in question within seven (7) days of the end of the month for which such contributions are deducted. A failure to comply renders the directors of the company personally liable for the payment of such amounts. Furthermore, it constitutes a criminal offence with severe penalties.

What is the financial impact of the National Disaster Regulations on employers?

  • The financial impact of the National Disaster Regulations will make it increasingly difficult for several employers to meet their obligations in terms of this section. The Financial Sector Conduct Authority (FSCA) has called for retirement funds to urgently submit rule amendments that can alleviate the financial difficulties faced by distressed employers and members during the coronavirus crisis.
  • If funds do not have rules providing for financially distressed employers and/or employees, the funds are requested to submit such rule amendments urgently to the FSCA. The communication on financially distressed employers and employees and the provisions of section 13A requiring submission for urgent rule amendments can be downloaded from the FSCA’s website: www.fsca.co.za. The FSCA urges employers to continue with the payment of risk benefits, such as group life and group disability benefits.

We urge our clients to contact their retirement fund administrators or brokers urgently to determine whether their fund rules make provision for financially distressed situations and, if not, to enquire as to whether such rules will be introduced by the Fund.

SERR Synergy understands and appreciates that the legal principles may be stretched at this very moment. The current crisis means that every employer has a responsibility in terms of good corporate governance to protect, educate and accommodate their employees in relation to each employee’s resources and facilities. We will assist in guiding, educating and supporting employers through these turbulent and most challenging times to balance productivity against sympathetic and humanitarian decisions.

About the Author: Anil Singh joined SERR Synergy in June 2017 and currently holds the title of Labour Legal Advisor. He is an admitted attorney who has practised in KZN and has more than 15 years' experience in the legal and medical industry in KZN and Gauteng respectively. He holds an LLB degree and a Master’s in Business law (LLM) from the University of Kwa-Zulu Natal and a Post-Graduate Diploma in Compliance Risk Management from the University of Johannesburg. He also holds Post-Graduate Certificates in Compliance Management, Corporate Governance, Money Laundering and Interpretation Theory from University of Johannesburg.

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