PENSION FUND REGULATORS GET TOUGH
“Sloppy” was how Mike Codron, the chief actuary at the Financial Services Board, described the approach of the majority of the country’s 220 pension fund administrators, talking at the recent Pension Lawyers’ Association conference in Johannesburg. Advocate Vuyani Ngalwana, the pension funds adjudicator, also made it clear that he intends applying the same exacting standards to parties appearing before him as he has, by all accounts, including his own, demanded of his own staff during his first year in office. Administrators, trustees and respondents before the adjudicator should take heed.
Codron expressed the FSB’s dissatisfaction with the large number of funds that had not submitted actuarial valuations by December 2004 as required by law, despite not being valuation-exempt. Funds that were previously valuation-exempt lost that status in consequence of the amendments to the Pension Funds Act in 2001, and will only be eligible to re-apply for exemption after they have submitted a recent actuarial valuation to the FSB. The FSB intends conducting inspections and issuing fines to defaulting funds (not their administrators) in the near future. It is also looking at establishing a new compliance section and intends raising its current levies to meet the anticipated expenses.
Ngalwana announced that proceedings before him will become more formal with immediate effect. From now on, parties named in complaints will have 20 days to respond to a complaint, and the adjudicator will not grant extensions readily. Once a complainant has received a copy of the response, he or she will have 10 days to reply in writing. Both parties will be restricted to arguing the cases they have made out in the papers lodged with the adjudicator. Good news for prospective complainants in Gauteng, Mpumalanga, Limpopo and the North West Province is that complaints may be lodged at the adjudicator’s Johannesburg office from 1 May.
The adjudicator took the opportunity to lay down the law in certain key areas. He will accept complaints that have been lodged with him even if they have not first been directed at the affected fund, administrator or employer. He will not investigate any complaints in relation to bargaining council funds. He does not consider the Prescription Act, which would prevent potential litigants from instituting proceedings more than three years after the relevant event in the ordinary course, to be binding on his office. He will not investigate complaints in relation to funds in liquidation. He will not consider complaints about decisions of the registrar of pension funds, including a decision to approve a rule that is seen to be unfair (such complaints should be directed to the FSB Appeal Board). He will however, consider the constitutionality of disputed rules. He will consider disputes regarding surplus apportionments if they relate to the period before 7 December 2001. And finally, he will hear complaints directed against administrators of retirement funds. Ngalwana made it clear that he does not intend to compromise on any of these issues, and will only adopt a different position in principle if a court finds that he should.
National Treasury is currently driving a broad review of retirement funding legislation, which includes proposals for more effective compliance monitoring and enforcement. Trustees, administrators and employers should therefore welcome the approach being adopted by the regulators as an opportunity to get their houses in order before the new act is promulgated, which is expected to be later in 2006.