HUNTER EMPLOYEE BENEFIT LAW
ROSEMARY
HUNTER/MS/OPINION MEMO
1.
I refer to the questions
raised at the meeting of the parliamentary portfolio committee on public
enterprises (PCPE) on
2.
Section 1 of the Bill with reference to section 1 of the Act
2.1.
Definition of employer
Pieter Hendrickse asked if we could not put all the definitions relating
to the various employers into one definition.
We have discussed this and have come to the view that that could create
confusion as it is important that the bill make it clear when reference is made
to a Transnet employer, or the Transnet Group of Employers, for example, as
distinct from any other employer or group of employers although there may be
occasions when reference need only be made to ‘an employer’.
2.2.
Definition of Minister
It was agreed that the reference to the Minister of Public Enterprises
be removed from the definition.
2.3.
Definition of “SOE Employer”
2.3.1.
It was suggested that a
different term be used because the definition incorporates the State but the
State is not understood in normal circumstances to be a state owned
enterprise. We suggest that the term “Alternative
employer” be used because it can embrace both the state and organisations owned
by the State. Alternatively the term
“Non Transnet Employer” could be used.
2.3.2.
It was agreed that it was
not necessary that the term be defined in a manner consistent with the proposed
Shareholder Bill because a term defined in one statute has no bearing on the interpretation
of the same term in another statute.
3.
Section 5 with reference to section 4A of the Bill
3.1.
Pieter Hendrickse has
requested that there be a subsection in section 4A which makes it clear what
are the powers of the main board of trustees of the Transport Pension Fund.
3.2.
In this context Transnet
proposed that the following subsection be inserted in section 4A:
“The
board of trustees of the Transport Pension Fund-
(a)
must exercise the powers contemplated in
sub-sections(3) and (7), section 5(3)(a), 6(1) and 10;
(b)
without derogating from the powers of the Sub Fund
Boards and subject to the Act and the Rules, must direct, control and oversee
the operations of the Transport Pension fund and, to this end, may take such
steps as may be necessary to resolve disputes, if any, between Sub-Fund Boards.”
4.
Section 6 with reference to section 5 of the Bill
4.1.
Please note that the term
“subfund committee” should be replaced with the term “subfund board” for
consistency with the rest of the bill.
4.2.
The PCPE recommended that
the bill be amended to provide that only those rule amendments which may have
an impact on the Transport Pension Fund require the consent of the
Minister. Transnet proposed that
subsection (3) read as follows:
“Any amendment of –
(a)
the General Rules
shall be made by the board of trustees subject to the approval of all the
Principal Employers or, if not every Principal Employer gives such approval,
subject to the approval of a majority of the Principal Employers and of the
Minister; and
(b)
the Special Rules
applicable to a Sub-Fund shall be made by the applicable Sub-Fund Board subject
to the approval of the applicable Principal Employer.”
and that a new subsection (3A) be inserted to say:
“If, in the opinion of the valuator of the Transport
Pension Fund, an amendment to either the General Rules or Special Rules may
affect the financial condition of that fund, an amendment may only be made with
the approval of the Minister, acting with the concurrence of the Minister of
Finance.”
5.
Section 7 with reference to section 6 of the Bill
Please note that the term “evaluation” in the heading should be
“valuation”.
6.
Section 9 with reference to section 10 of the Bill
6.1.
Members of the PCPE
expressed concern about the right of the employer to recover from a members’
pension benefits compensation for loss caused to the employer which has been
caused by the dishonesty of fraud of the member. I understand that from yesterday’s discussion
that you are not concerned about the deduction from pension benefits of
amounts due by members of the funds to their employers in respect of loans
granted to them by those employers, whether for housing purposes or otherwise.
6.2.
I confirm that Transnet
pointed out that –
6.2.1.
this provision appears in
the original statute and no change to it is now requested by Transnet, the
trustees of the Transnet funds or the unions representing Transnet employees;
6.2.2.
without such a provision,
many employers may be reluctant to establish and contribute to occupational
retirement funding arrangements;
6.2.3.
equivalent provisions
appear in numerous other statutes governing retirement funds (examples of which
are given below)\;
6.2.4.
the issue is likely to be
considered by National Treasury when it prepares policy documents for
consideration in the context of the proposed drafting of a new statute to
govern all occupational retirement funds in this country, including both those
funds established in terms of the Pension Funds Act and those established in
terms of specific statutes, and so, in the opinion of Transnet, it would be appropriate
for the issue to be dealt with holistically by Parliament in the context of
that reform initiative.
6.3.
I was specifically asked to
provide the PCPE with examples of other statutes in which similar provisions
appear. These are:
6.3.1.
the General Pensions Act,
section 2(3) of which says the following:
(3) Notwithstanding the provisions of
subsection (1) or of any other law—
(a) any amount which is
payable to the Government, a provincial administration or a pension fund by any
person in the employ of the Government or a provincial administration on the
date of his retirement or discharge, or which the Government or a provincial
administration is liable to pay in respect of such person;
(b) any amount which has
been paid to any person in accordance with the provisions of a pension law and
to which such person was not entitled;
(c) the amount of any loss
certified by the Auditor-General or a provincial auditor to have been sustained
by the Government or a provincial administration through theft, fraud,
negligence or any misconduct on the part of any person,
may be deducted from the annuity or
benefit payable to such person under any pension law in a lump sum or in such instalments
as the Secretary may determine.
6.3.2.
the Pension Funds Act, in
terms of which are regulated private sector retirement funds (other than
bargaining council funds, of which there are approximately five and which are
regulated in terms of the Labour Relations Act), which in section 37D says
that, notwithstanding the general prohibition in the section against the
attachment of and the execution of claims against a person’s pension fund
benefits, the pension fund may deduct from such benefits -
“(ii) compensation (including any legal costs
recoverable from the member in a matter contemplated in subparagraph (bb)) in
respect of any damage caused to the employer by reason of any theft,
dishonesty, fraud or misconduct by the member, and in respect of which—
(aa)
the
member has in writing admitted liability to the employer; or
(bb)
judgment
has been obtained against the member in any court, including a magistrate’s
court
from
any benefit payable in respect of the member or a beneficiary in terms of the
rules of the fund, and pay such amount to the employer concerned;
and,
6.3.3.
the Post Office Act, which
in section 10B says that -
(2) Notwithstanding the
provisions of subsection (1), the pension fund concerned may on the date of
a member’s retirement or the date on which he ceases to be a member of the
fund, deduct—
(a)
any
amount due to that fund in respect of a loan granted by that fund in terms of
its statutes to a member or beneficiary, from any benefit to which the member
or beneficiary is entitled in terms of such statutes;
(b)
any
amount due by a member to his employer in respect of—
(i)
any
loan granted by the employer to such member at his request;
(ii)
any
amount for which the employer is liable in terms of a guarantee furnished in
respect of a loan granted by some other person to the member for the purchase
of land or a dwelling or the erection, alteration, improvement, maintenance or
repair of a dwelling for occupation by the member or a dependant of the member;
(iii)
compensation
(including the legal costs recoverable from the member in a matter contemplated
in subparagraph (ii)) in respect of any damage caused to the employer, by
reason of any theft, dishonesty, fraud, misconduct or negligence by the member;
(iv)
any
other written agreement between the member and the employer in respect of a
study bursary, training of the member or the military service obligations of
the member,
from any benefit payable to the
member or a beneficiary in terms of the statutes of that fund, and pay such
amount to the employer concerned;
6.4.
The Government Employees
Pension Law of 1996, too, contains an equivalent provision.
6.5.
I appreciate that the PCPE is concerned about the position of the
dependants of those who, by the deduction from pension benefits of amounts
required to compensate employers for losses caused through their fraud or
dishonesty, may suffer hardship.
However, not all persons who engage in such conduct are poor and not all
dependants of such persons are without other sources of income. I am aware of one case in which a member of a
fund defrauded his employer to the tune of some R1 million. When his fraud was discovered he committed
suicide. All of his assets were held in
the name of his spouse so the employer was unable to recover the amounts lost
to it.
6.6.
Interestingly, in an as yet unreported judgment of the Durban and Coast
Local Division of the High Court in the matter of Charlton & others v the Tongaat-Hulett Pension Fund & others dated
1 February 2006, the court said that the equivalent provision in the Pension
Funds Act, 1956, authorised the withholding of pension benefits pending a
determination of liability in civil proceedings and was not
unconstitutional. The applicants in that
case were an employee who had been dismissed for fraud involving some R1,6m and
his wife and children. In particular,
the court held that the rights of the wife and children to maintenance secured
by the employee’s pension benefits only arises in respect of funds that are
lawfully due to him and, pending the determination by the civil court of the
question whether the employee was liable to compensate his erstwhile employer for
the loss caused through his alleged fraud, it could not be said that the
pension benefits were lawfully due to him.
6.7.
As was pointed out by the
Honourable Mr. Hennie Bekker MP, the protection of pension benefits against
claims for compensation may encourage criminal conduct.
7.
Section 12 with reference to section 11 of the Act
7.1.
You will recall that it was
not clear to the members of the Committee what kinds of monies could be “due by
a pensioner to Transmed” in terms of the Transmed rules. We indicated that those amounts were likely
to be unpaid contributions to the medical scheme. It is unlikely, but not impossible, that it
could also include amounts paid by Transmed to providers of medical products
and services to a member in excess of amounts for which it was liable in terms
of the rules.
7.2.
In the circumstances we do
not recommend that any amendment be made to this section. We confirm that no amendment to it is sought
by Transnet or the unions representing its employees.
8.
Section 13 with reference to section 12 of the Act
This section provides for
the guarantee to the Transport Pension Fund and the Transnet Second Amendment
Act provided by Transnet and the State.
Given that the guarantee is also dealt with in terms of section 4A(11) and
(12), we suggest that the words “Subject to section 4A(11) and (12) be inserted
at the beginning of section 12(1) so that it is clear that Transnet does not
guarantee that portion of the liabilities of the Transport Pension Fund which
are to be applicable to the members, pensioners and other beneficiaries
applicable to SAA and Metrorail following the restructuring of that fund into
subfunds.
9.
Section 14 with reference to section 13 of the Act
The Committee asked that section 13(2)(c) not be deleted but instead be
phrased in the positive. In the
circumstances Transnet proposes that subsection (c) state the following:
“(c) The
Fund shall for the purposes of the application of the Income Tax Act, 1962, [no
longer] nonetheless continue to be regarded as a pension fund as defined
in paragraph (a) of the definition of “pension fund” in section 1 of that Act.”
10. Section 15 with reference
to section 14 of the Act
10.1.
As was pointed out by one
of the honourable Members of the Committee, there is a superfluous “a” in line
40 at page 12 of the Bill which should be removed.
10.2.
The Committee has asked for
written reasons why it believes that no new employees of non-Transnet employees
should be permitted to join the Transnet Retirement Fund, a defined
contribution fund and why this issue should be determined in terms of the Act
rather than the rules of the fund itself. I believe Transnet was going to
address this issue separately and have therefore not included a response in
this memorandum.
11. Section 16 with reference
to section 14A of the Act
As Transnet’s representative pointed out at the meeting, the reference
to section 5 in subsection (8) of section 14A is superfluous and should be
deleted.
12. Section 17 with reference
to section 14B of the Act
12.1.
As mentioned during the
Committee meeting, there are a number of pensioners now in receipt of pensions
from Transnet who are not members of any of the funds established in terms of
the Transnet Pension Funds Act. To
provide for proper financial management and governance of this liability,
Transnet proposes that they be paid pensions by the Transnet Second Defined
Benefit Fund and accordingly proposes that the following new subsection be
inserted in section 14B:
“(6) The
Minister may by notice in the government Gazette and the consent of Transnet and
trustees and with effect from a date stipulated in such notice, determine
that persons or categories of persons now in receipt of pensions and/or
benefits paid by Transnet or who, upon the happening of a future event, will
become entitled to a pension and/or benefit paid by Transnet, will no longer be
entitled to such pensions and/or benefit and will instead be entitled to
pensions and/or benefits paid by the TSDBF.
(7) Provided
that in the event that the Regulations issued in terms of section 4 of the S.A
Transport Services Act, no 65 of 1981, are repealed as contemplated in Part 6
of Schedule 2 of the Legal Succession to the South African Transport Services
Act, no 9 of 1989, any person entitled to a benefit in terms of such
Regulations shall with effect from the date of the repeal of such Regulations,
become a Special Pensioner in terms of the Act and receive benefits from the
TSDBF which are no less favourable than that which such person received in
terms of the Regulations.”