Retirement funding – obligations on the employer

August 29th, 2016

By Andrew Stansfield

The Pension Funds Act 24 of 1956 (the Act) imposes a clear obligation on employers to pay over retirement contributions timeously, which in the absence of strict compliance becomes a criminal offence. The purpose of this article is to sensitise all persons responsible for practice management to the seriousness of the risks, which may arise in instances where there is non-compliance with the provisions of the Act.

What are the requirements when paying contributions to a pension or provident fund?

Section 13A of the Act deals with the payment of contributions to pension and provident funds. The employer must pay all contributions, whether member contributions or employer contributions, that are due and owing to the fund by the 7th of the month, following the month in respect of which the contributions are due. What this means is that all contributions due for the month of, for example, February must be paid to the fund by 7 March. In addition the employer must submit a monthly reconciliation schedule of all contributions so that the fund may correctly allocate the contributions to the members’ records. The reconciliation schedule must be submitted to the fund no later than 15 days after the end of the month in respect of which the payment was made.

Personal liability for contributions to a pension or provident fund

With effect from 28 February 2014, the Act states that the following persons shall be personally liable for compliance with s 13A and for the payment of any contributions –

‘(a) if an employer is a company, every director who is regularly involved in the management of the company’s overall financial affairs;

(b) if an employer is a close corporation registered under the Close Corporations Act [69 of 1984], every member who controls or is regularly involved in the management of the close corporation’s overall financial affairs; and

(c) in respect of any other employer of any legal status or description that has not already been referred to in paragraphs (a) and (b), every person in accordance with whose directions or instructions the governing body or structure of the employer acts or who controls or who is regularly involved in the management of the employer’s overall financial affairs.’

If an employer fails to comply with the requirements of s 13A, all the directors (in respect of a company), all the members regularly involved in the management of the closed corporation (in respect of a closed corporation), or all the persons comprising the governing body of the employer, as the case may be, shall be personally liable in terms of this provision.

Penalties for non-compliance

As set out above, certain persons at the employer shall be held personally liable for non-compliance with s 13A of the Act. The amendment to the Act has made this contravention a criminal offence.

Any person who contravenes or fails to comply with s 13A of the Act may be found guilty of an offence and liable on conviction to a fine not exceeding R 10 million or to imprisonment for a period not exceeding ten years.

Trustee duties

The trustees of a pension or provident fund must report any non-compliance to the Financial Services Board.

Practitioners are advised to take note and to circulate this article as appropriate.

Andrew Stansfield BCompt (Hons) (Unisa) Post Grad Dip Tax (UCT) is the Finance Executive of the Attorneys Fidelity Fund and Chairperson of the Legal Provident Fund.

This article was first published in De Rebus in 2016 (Sept) DR 30.