A retirement fund is required to finalise the tracing and investigation of a deceased member’s dependants within 12 months. Are the 12 months counted from the date of the member’s death or from the date the fund becomes aware of his or her death?
This question came before the High Court in Mpumalanga in a case between the Old Mutual-sponsored South African Retirement Annuity Fund (SARAF) and two respondents, the Pension Funds Adjudicator and a fund member’s widow.
The relevant statutory provisions in this matter are found in section 37(1) of the Pension Funds Act (PFA), particularly paragraphs (a) and (c).
(a) “If the fund within twelve months of the death of the member becomes aware of or traces a dependant or dependants of the member, the benefit shall be paid to such dependant, or as may be deemed equitable by the fund, to one of such dependants or in proportions to some of or all such dependants.”
(c) “If the fund does not become aware of or cannot trace any dependant of the member within twelve months of the death of the member and if the member has not designated a nominee or if the member has designated a nominee to receive a portion of the benefit in writing to the fund, the benefit or the remaining portion of the benefit after payment to the designated nominee, shall be paid into the estate of the member or, if no inventory in respect of the member has been received by the Master of the Supreme Court in terms of section 9 of the Administration of Estates Act, 1965 (Act No. 66 of 1965), into the Guardian’s Fund or unclaimed benefit fund.”
The member died in December 2019. He had not nominated a beneficiary, and he left no will. SARAF learned of the member’s death in March 2022, when a claim was submitted.
His widow did not immediately inform SARAF of her husband’s death because she was not aware he was a member of the fund. Her claim was submitted on her behalf by the brokers whom she approached after she was referred to them.
SARAF acknowledged that section 37C(1)(a) of the Act mandates it to investigate and trace all the deceased member’s dependants and to pay the death benefit due to them. But in this instance, it did not attempt to trace them. Its interpretation of the statutory provision was that this duty arises only if it learns of the death within 12 months of the death of a member. It only learned of the death after the 12 months had lapsed. Therefore, it decided not to investigate, but to pay the death benefit into his estate.
Aggrieved by the fund’s decision, the widow complained to the Office of the Pension Funds Adjudicator.
Adjudicator’s decision
In a ruling handed down in June last year, the Adjudicator decided the fund’s duty to trace the dependants starts the moment the fund is made aware of the member’s death. It does not start from the actual date of death.
In reaching this conclusion, the Adjudicator relied on the decision in Masindi v Chemical Industries National Provident Fund and Others (2016), where the High Court held:
“Whilst section 37C(1) does not expressly state that the 12-month investigation period to trace the dependants of a deceased only commences once the fund has obtained knowledge of the death of the deceased, the only logical interpretation of this section is that a fund cannot comply with its obligation if the legislative requirement for its imposition, namely the death of a member, is not made known to the fund. In Government Employees Pension Fund Provincial Government of Gauteng v Buitendag & Others, it was held that the employer in that matter had the obligation to provide the fund with information pertaining to the dependants of the deceased. By implication, the employer had to inform the fund of the death of the deceased as well. The 12-month period could only have commenced to run from the time that the respondents became aware that the deceased had died.”
The Adjudicator said the general rule expressed in section 37C(1) that the death benefit does not form part of the estate is subject to three exceptions. A fund can pay a death benefit into the deceased’s estate only under the following circumstances:
- It has not identified any dependant, and there is no nominated beneficiary, but the estate’s liabilities exceed its assets; or
- The deceased has no dependants and did not designate a nominee in writing; or
- The deceased has designated a nominee only to receive a portion of the death benefit, and the remaining balance must be paid to the estate.
The Adjudicator set aside SARAF’s decision to pay the death benefit into the deceased’s estate. She ordered the fund to determine the deceased’s beneficiaries and their benefit entitlement and to pay the death benefit to the beneficiaries.
SARAF did not accept the Adjudicator’s interpretation, arguing it went against the literal interpretation of the statutory provision. It therefore brought an application in terms of section 30P of the PFA to have the Adjudicator’s decision set aside.
Retirement funds must be proactive
In a decision handed down this month, Judge Takalani Ratshibvumo held that the interpretation advanced by SARAF lacked logic and went against the purpose and spirit of the PFA, which is to protect a members’ dependants and give them access to the benefits without having to compete with other creditors who bring claims against the estate.
In contrast, the interpretation in Masindi was logical and in line with the purport of the legislature when it enacted section 37C.
He said the interpretation in Masindi also appears to be in line with the approved approach in many other similar provisions, to the effect that the countdown starts only when one is made aware of the root cause, as opposed to the date of the root cause, irrespective of whether one has been alerted to that root cause.
Judge Ratshibvumo said if SARAF’s interpretation were to prevail, a fund would have far less than the envisaged 12 months to trace and investigate the dependants because, practically, it was almost impossible for a fund to know of the death on the day a member dies.
SARAF’s interpretation would also fail in ensuring that the fund carries out its mandate to trace the dependants and investigate their dependency on the deceased member.
The fund could simply sit back, instead of being proactive, until the 12 months are over, and claim it did not investigate because it only became aware of the death after 12 months had lapsed, Judge Ratshibvumo said.
“There are no safeguard measures through which the fund can be held accountable for doing nothing to investigate while years go by without any further contribution from a member who, by anyone’s judgment, it would mean that he has died or ceased to work. The lacuna in the Act, real or perceived, cannot be used as a means to condone the failure by any party to heed the mandate given by the same statutory provision. If this is allowed, the statute shall become self-destructive for failing to police adherence to its provisions.”
He said SARAF’s rigid interpretation “forgets the purpose for the existence of the same statutory provision it attempts to interpret”. For this reason, the Supreme Court of Appeal, in Fundsatwork Umbrella Pension Fund v Guarnieri and Others, said where there is doubt about the identity of the dependants who are to receive a distribution, or as to the correct distribution among those dependants, the board of trustees is not bound by the 12-month period, but may delay for a time necessary to resolve the issue.
Judge Ratshibvumo dismissed SARAF’s application, with costs, and upheld the Adjudicator’s decision.
