Employers and retirement fund trustees are reminded that the new conduct standard setting out their obligations in respect of fund contributions takes effect today (20 February).
Conduct Standard 1 of 2022, issued in terms of the Financial Sector Regulation Act, replaces regulation 33, issued under the Pension Funds Act (PFA). Regulation 33 was repealed on 27 January.
It is hoped the conduct standard will help to eradicate the non-payment of retirement fund contributions by employers – despite deducting these amounts from employees’ salaries every month. The FSCA has attempted to address this problem through various initiatives over the years, and the latest is the introduction of Conduct Standard 1.
The conduct standard’s requirements relating to the payment of retirement fund contributions mirror those in regulation 33. But it also introduces additional measures designed to remedy the shortcomings in regulation 33.
One of the key changes is the requirement for retirement funds to notify every employer that intends to join the fund of their duties, obligations and liabilities under section 13A of the PFA and the conduct standard. Retirement funds are also required to do this annually.
An employer is obliged to provide a retirement fund with certain information about the contributions collected and paid over to the fund on behalf of its employees. The conduct standard requires contribution data to be accompanied by a declaration from the employer stating that the information provided is a true and correct reflection of the contributions required to be paid to the fund.
The conduct standard sets out broad requirements for retirement funds that outsource the recovery of arrear employer contributions to an attorney or third party. Trustees must take these requirements into account when formulating policies and entering into agreements relating to the outsourcing of the recovery of arrear contributions.
The FSCA believes this provision is necessary to combat “undesirable practices”, which include:
- Attorneys earn interest on the money they recovered from an employer on behalf of a fund while the money is in their trust account. The recovered funds are not paid over to the fund timeously, potentially to maximise the interest earned.
- Funds do not provide an attorney with instructions about what action the attorney should take when dealing with employers that refuse to pay arrear contributions. The lack of instruction and clear agreement on the processes between the fund and the attorney often results in delays in taking appropriate action to address outstanding contributions.
- The payment of exorbitant fees.
Click here to download Conduct Standard 1 of 2022.
New reporting formats published
The FSCA has published new formats for the notification and reports required in terms of paragraphs 2(2), 4(3)(c) and 4(4)(a) of the conduct standard. These are:
- Notification to and request from employer by pension fund (paragraph 2(2));
- Reporting of contraventions to the FSCA (paragraph 4(3)(c)); and
- Reporting contraventions to the South African Police Service (paragraph 4(4)(a)).
On 30 September 2022, the FSCA published RF Notice 14 of 2022, which determined the formats for the abovementioned notification and reports.
In a communication published on 17 February, the FSCA said it has come its attention that the formats in Notice 14 of 2022 are not conducive to the reporting of contraventions by funds with multiple participating employers.
The FSCA has therefore repealed RF Notice 14 of 2022 and replaced it with RF Notice 8 of 2023 (“Determination of format of documents relating to payment of pension fund contributions”), which came into effect on 19 February.
