SOUTH AFRICA: EMPLOYERS TAKE NOTE – A NEW CONDUCT STANDARD ON THE REQUIREMENTS RELATED TO THE PAYMENT OF RETIREMENT FUND CONTRIBUTIONS AND SUBMISSION OF PRESCRIBED INFORMATION
On 27 January 2023, the Minister of Finance, in terms of section 36 of the Pension Funds Act 1956 (PFA) and with effect from 20 February 2023, repealed Regulation 33 of the PFA.
Regulation 33 supports the implementation of section 13A of the PFA. It sets out, amongst other things, the requirements relating to the minimum information an employer must furnish to a retirement fund with regard to the payment of contributions by employers to retirement funds in terms of section 13A of the PFA as well as the duties of the person responsible or monitoring compliance with section 13A of the PFA.
Section 13A of the PFA places certain obligations upon employers of employees who are members of a retirement fund to pay contributions and submit minimum information relating to the payment of contributions to a retirement fund within prescribed timelines.
In terms of section 13(8) of the PFA, if the participating employer is a company for example, then every director who is regularly involved in the management of the company’s overall financial affairs, will be held personally liable for compliance with section 13A of the PFA and for the payment of any contribution referred to in section 13A(1). Where an employer is a close corporation, every member who controls or is regularly involved in the management of the close corporation’s overall financial affairs, will be held personally liable for compliance.
Section 13A(9)(a) of the PFA places an obligation on the fund to request the employer to notify the fund of the identity of the person contemplated in section 13A(8), in writing. Should the employer fail to respond to the fund’s request, then, in terms of section 13A(9)(b), all directors of the company, or in the case of a close corporation, all the members regularly involved in the management of the close corporation, will be held personally liable for compliance with section 13A and for the payment of contributions.
Whilst the provisions set out in section 13A of the PFA remain unchanged, Regulation 33 will be replaced (with effect from 20 February 2023) by a new Conduct Standard.
New requirements that employers must take note of
On 19 August 2022, the Financial Sector Conduct Authority (FSCA) published Conduct Standard 1 of 2022 titled Requirements related to the payment of pension fund contributions (Conduct Standard).
According to the Conduct Standard, the Conduct Standard will come into operation six months after the date of publication (being 20 February 2023, which coincides with the date on which Regulation 33 will be repealed) or on a later date as determined by the FSCA by notice on its website. As it has now been confirmed that Regulation 33 will be repealed with effect from 20 February 2023, it is likely that the Conduct Standard will take effect on 20 February 2023 unless the FSCA publishes a later effective date on its website prior to 20 February 2023.
Similar to Regulation 33, the Conduct Standard sets out requirements relating to the payment of retirement fund contributions; the information an employer must submit to a retirement fund; and the duties of the person responsible for monitoring compliance with section 13A. The Conduct Standard, however, includes several additional requirements that employers will be required to comply with going forward.
\For example, an employer will, as part of the minimum information to be furnished to a retirement fund in the initial contribution statement, be required to include the following additional information relating to each member (employee):
- income tax number;
- contact number and, where available, cellular number;
- email address (where available);
- postal address; and
- residential address
The employer will also be required to include in the initial contribution statement, the identity of the person envisaged in section 13A(8) of the PFA, that is, the person who will be held personally liable for compliance with section 13A of the PFA.
The minimum information to be furnished to a retirement fund by an employer in the subsequent contribution statement must, amongst other things, include all the minimum information that is required for the initial contribution statement (including the identity of the person envisaged in section 13A(8) only if the identity of that person has subsequently changed from that stated in the initial contribution statement), as well as the membership number allocated to each member by the retirement fund.
The initial and subsequent contribution statements must be accompanied by a declaration by the employer that all employees eligible to be members of the fund are accurately reflected in the minimum information.
It is important to emphasise that in terms of section 37 of the PFA, any person who contravenes or fails to comply with section 13A - which includes the requirements set out in the Conduct Standard - is guilty of an offence and liable on conviction to a fine not exceeding ZAR 10 million or to imprisonment for a period not exceeding 10 years, or to both a fine or imprisonment.
Whilst we are not aware of any cases where the provisions of section 37 of the PFA have been invoked as a result of non-compliance with section 13A, non-compliance with the provisions remains a criminal offence.
It is arguable that the FSCA may, in terms of section 167 of the Financial Sector Regulation Act, 2017, impose an administrative penalty. This section permits the FSCA, by order served on a person (which includes a natural or juristic person), to impose an appropriate administrative penalty that must be paid to the FSCA if the person has contravened a financial sector law – which includes the PFA.
Employers are encouraged to take note of their obligations set out in the Conduct Standard and to ensure that they have the necessary information required to be submitted as part of the contribution schedules on file, and if not, to obtain the information before the effective date of the Conduct Standard. As an example, not all employers may have the fund membership numbers in respect of each employee-member. Where this may be the case, employers are encouraged to reach out to their applicable retirement funds to obtain the membership numbers.
Lastly, although it is the retirement fund’s duty to request the employer to provide the identity of the person for purposes of section 13A(8), it is arguable that because the employer will be obliged in terms of the Conduct Standard to include the identity of that person in the subsequent contribution statement where the identity has changed from what was reported in the initial contribution statement, employers will be required to ensure that the retirement fund has the most up to date information as non-compliance has far-reaching consequences as mentioned above.
A copy of Conduct Standard can be accessed here.