Pension Funds Second Amendment Bill:deliberations

Meeting report

FINANCE PORTFOLIO COMMITTEE
6 September 2001
PENSION FUNDS SECOND AMENDMENT BILL: DELIBERATIONS

Chairperson: Ms Hogan

DOCUMENTS HANDED OUT
Pension Funds Second Amendment Bill [B41-2001] at http://www.treasury.gov.za
Working draft of the Pension Funds Second Amendment Bill with amendments included

SUMMARY
The Bill in its amended form was handed out. There were many errors and incorrect numbering and the document needs to be rectified. Two clauses in this document were relevant to the discussion in the meeting: the amendment to Clause 15 L on Specialist Tribunal and on Employer and Member Surplus Accounts. Also dealt with were what regulations can be included in the Bill.

MINUTES
Regulations to be included in the Bill
Mr Andrew (FSB) said that S15B(3) would be deleted in its entirety and replaced with the following:

The new S15B(3) also has 4 subsections from (a) – (b). The first two subsections namely (a) and (b) are the ones that incorporate the regulations into the Bill.

S15(3)(a) states that the board shall determine who may participate in the apportionment of actuarial surplus. It will include existing members and all former members, or who experienced conversion from 1 January 1980 to the surplus apportionment date. At this point the committee took a principle decision that all former members can benefit and that there would be no discrimination on the basis of how a member left the fund. The clause continues to say that the registrar can exclude former members from benefiting if there are insufficient records provided that reasonable steps were taken to obtain the records, to construct the records from employer records or any fund that a member transferred to, to obtain records from the former members themselves following and advertisement on a national basis. The clause gives former members 6 months to come forward and after nine months they can be excluded.

Mr Andrew (FSB) said that many funds do have complete records.

Ms Hogan asked if organised labour should not be involved in the process to track down former members.

Dr De La Rey said that flexibility is needed so they need to let the registrar determine the procedure because some funds are localised so it is too expensive to advertise nationally.

Ms Hogan said that she was not referring to advertising but all she wanted was for organised labour to be involved in finding the members. Even more so since unions were not represented on boards of DB funds.

Prof. Turok suggested that they just add as another proviso that the records of labour must be used to tack down former members if applicable. This was agreed.

Mr Booi (ANC) was concerned that the 9 month cut off date would be unfair to people who really do not know about their entitlement and cannot be reached.

Mr Andrew (FSB) said that they could use the same mechanism as insurance companies. When demutualisation took place the unclaimed benefits for known beneficiaries was put aside. They were given upto 5 years to come and collect.

Mr Andrew (DP) distinguished between former members who are known but cannot be traced and former members that nobody knows exist.

Mr Masilela (Treasury) suggested two cut off dates. One for unclaimed benefits and one for former members that are not known.

Ms Hogan agreed with this proposal and asked the drafters to draft something that reflect that.

The second sub clause, namely S15B(3)(b) incorporates the conditions under which the surplus allocated to the employer can be credited to the employer surplus account.

Ms Hogan was satisfied with how the regulations were brought into the Bill and said that now it was much clearer. The Committee then looked at the major changes to the Bill starting with the Specialist Tribunal.

Amendment to Clause 15 L – Specialist Tribunal
Mr Andrew (FSB) said that after the registrar refers the scheme to the tribunal the new S15L kicks into operation. From a panel of people, the board will select three of them who will adjudicate the matter. One person will have to be a lawyer and another will have to be an actuary - both of whom has experience in retirement fund financing.

There are two new subclauses added at the end of 15L. One states that the decision of the tribunal is final and binding. The other states that the registrar must accept the decision unless he establishes that the tribunal failed to exercise its discretion properly and in good faith.

Mr Booi questioned whether the new procedure also opens up the possibility of an endless resolution process.

Dr De la Rey said that the amendments settle the merits once and for all.

Ms Hogan asked if it could still go to the FSB Appeal Board.

Dr De la Rey confirmed that any decision taken by the registrar could be taken to the FSB Appeal Board. But now the Appeal Board would be limited to reviewing the process and cannot look at the merits.

Mr Malan (Treasury) suggested that the clause could state that the decision of the tribunal is final and binding on all the stakeholders. In the next clause instead of saying that ‘the registrar must establish that the tribunal acted improperly’, they could say that ‘if in his opinion the tribunal did not act in good faith’.

Ms Hogan was still concerned that the tribunal was hooked into the machinery of the FSB in that the process could still end up at the FSB Appeal Board whereas with an arbitrator the decision is final.

Dr De la Rey pointed out that the problem does not lie in the distinction between the specialist tribunal and an arbitrator. The registrar accepts the determination made. Once the registrar accepts the determination, the FSB Appeal Board comes into play. He could not imagine a process where the regulator is excluded for accepting the final determination.

Ms Hogan asked if the members were happy with the process as it stands. The committee members said that they were happy. Ms Hogan was not happy but said that she would follow the lead of the Committee but still refer the matter for further advice.

Discussion on Employer and Member Surplus Accounts
Ms Hogan asked who had authority to say what happens with the funds in the member surplus accounts and the employer surplus accounts.

Mr Andrew (FSB) said that the Board of the fund decides what happens to the funds in the member surplus account. The same should apply to the employer surplus account but only if there are many employers in the fund. If funds have a single employer then the employer should be able to request the fund to access the surplus and the fund will be obliged to carry out the request of the employer. The fund cannot be harmed financially and the members cannot be prejudiced because thus surplus has been apportioned to the employer after the embers have received their share.

The committee was concerned that the employer could just access the surplus but the members could not.

Mr. Andrew (FSB) suggested that instead of having the whole board approve what is done with the member surplus account, they could give this power to the member elected representatives on the board provided that they cannot do anything to jeopardise the financial soundness of the fund.

Ms Hogan suggested that the meeting be adjourned to give the committee an opportunity to peruse the amended version of the Bill that had been handed out.

The meeting was closed.