Geraldine Pelser | Technical Specialist | Operational Risk | Alexander Forbes | mail me |
We are living in unprecedented times and the COVID-19 pandemic is affecting everyone differently. The lockdown following the outbreak of the COVID-19 pandemic is resulting in significant financial strain.
Many employers are unable to pay salaries or have been forced into a position where they can only pay reduced salaries. This directly impacts contributions to retirement funds, with some employers seeking temporary relief from the obligations placed on them by Section 13A of the Pension Funds Act.
Retirement funds are highly regulated and not paying Section 13A contributions is a criminal offence. The Financial Sector Conduct Authority (FSCA) has responded swiftly by issuing guidance on temporary contribution relief (FSCA communication 11 of 2020 [RF]).
We believe that this form of relief is essential to help employers and employees during these unprecedented and challenging times.
None of us were afforded the luxury of time to train and prepare for the COVID-19 pandemic before it started. We therefore have no choice but to keep adjusting our sails to weather the storm as it unfolds. We have to be resilient and respond to challenges, and take advantage of opportunities, as they arise.
Never waste a good crisis
This is, however, a great opportunity to accelerate the adoption of new and better solutions. Now is the time to embrace technology fully by having virtual meetings and interacting on a paperless basis between trustees, employers and administrators. This will not only ensure the vital ongoing functioning of the retirement fund, but also bring with it many environmental and other benefits.
The same applies to communication with members: whilst paper-based communication with members has been rendered impossible under current conditions, communication by electronic media is not been hindered at all.
The boards of funds and benefit administrators have an important role to play to protect members’ interests. This has also been highlighted in the FSCA Communication 12 of 2020 (General) – Impact of Coronavirus (COVID-19): Expectations on Regulated entities.
The board of a retirement fund has the fiduciary duty to act with the utmost good faith towards the fund and in the best interest of all its members. The board should keep abreast of risks that COVID-19 brings to the fund and take necessary steps to mitigate such risks.
Contributions should not be reduced, nor suspended prematurely. Risk premiums (death, disability, etc.) should be maintained to ensure that further future distress is reduced.
Benefit administrators should ensure that they sustain their operational ability by ensuring contributions are invested timeously, and that benefits are paid accurately and on time to members or beneficiaries.
In addition, benefit administrators are expected to keep funds and members, as well as third parties, informed of any changes to their processes and procedures resulting from the pandemic.
Contact with members is essential
Employers also have a fundamental role to play in protecting members of retirement funds. This pandemic is highlighting the fact that administrators are receiving inadequate member details from employers.
As an example, boards of trustees would be able to direct administrators to send communication (including benefit statements) to members if the employer is able to provide cell phone numbers and e-mail addresses for all members of the retirement fund.
The historical practice of providing minimal member data to the administrators has contributed to the fact that billions of rands in unclaimed benefits are due to individuals who cannot be traced.
Being able to pay these benefits could have provided much-needed financial relief during these challenging times. For this and numerous other reasons it is essential that employers provide administrators with good quality and complete member information.
Every storm, no matter how big and strong, passes eventually
There have been pandemics in the past and humanity has overcome them all. We will get through this pandemic as well: storms don’t last forever, and the greater the storm, the brighter the rainbow.
