ConCourt Judgement on medical schemes savings accounts

Following numerous enquiries for clarity on the implications of the recent Constitutional Court judgment regarding the correct accounting treatment of medical schemes members’ personal savings accounts (MSA), the Council for Medical Schemes (CMS) published an explanatory media release.

Effect on medical schemes and administrators

• Medical schemes members’ personal savings funds need not be accounted for separately in the AFS and must be considered as an asset of the scheme in the submission of the AFS.
• The judgment does not have an influence on the calculation of the solvency levels of medical schemes.
• Previously savings monies were excluded from Annexure B as schemes were directed to invest these monies separately from scheme funds. Following the judgment these monies will now fall within the ambit of Annexure B.
• Schemes no longer have to allocate the interest earned on medical scheme members’ personal savings balances to the individual savings accounts of members and may retain the income with other scheme assets.
• Schemes that wish to amend their registered rules accordingly may do so during the October rule submissions for incorporation from 1 January 2018.
• The Prescription Act will apply to unclaimed members’ savings accounts and if these claims prescribe the amounts will be written back to the scheme.

Effect on members with savings accounts

• Funds deposited in a member’s savings account shall be available for the exclusive benefit of the member and his or her dependants but may not be used to offset contributions, provided that the medial scheme may use the funds to offset debt owed by the member to the scheme following the member’s termination of membership of the scheme (sub-regulation 3)
• Credit balances in a member’s savings account shall be transferred to another medial scheme or benefit option with a savings account, as the case may be, when such member changes medical schemes or benefit options (sub-regulation 4)
• Credit balances in a member’s savings account must be taken as a cash benefit, subject to applicable taxation laws, when the member terminates his or her membership of a medical scheme or benefit option and then enrols in another benefit option or medical scheme without a savings account; or does not enrol in another medical scheme (sub-regulation 5)
• The funds in a member’s savings account shall not be used to pay for the costs of a prescribed minimum benefit (sub-regulation 6).
• Members are only affected if a scheme is liquidated in which instance, their savings moneys will be divided amongst the creditors of the scheme with the other assets of the scheme

Click here to download the comprehensive media release