A recent ruling by the Financial Services Tribunal (FST) has confirmed that the Office of the Pension Funds Adjudicator (OPFA) has no jurisdiction over unapproved disability benefit claims underwritten by insurers through employer-held policies.
This decision, arising from the case of Seth Bouah v Sanlam Umbrella Provident Fund and Others, sets out the limits of the Adjudicator’s authority when dealing with employer-insurer agreements.
The crux of the matter was whether the OPFA was correct in its determination that the Office lacks jurisdiction concerning claims for unapproved disability benefit claims arising from policies taken out by an employer from an insurer.
Bouah’s complaint centred on the non-payment of a disability benefit underwritten by Old Mutual. As a Sun International employee and a member of the Sanlam Umbrella Provident Fund from 1 July 2019 to 30 June 2023, Bouah made regular contributions to the fund.
Unapproved vs approved
The registered rules of the fund make provision for two types of disability benefits: an unapproved disability benefit and an approved disability benefit.
An approved disability benefit is provided through a policy effected by the fund on behalf of its members. The benefit is paid only when the insurer deems the member permanently disabled after a 24-month waiting period covered under the employer’s temporary income disability insurance.
Payment of the approved disability benefit cannot be made until the temporary income disability benefit is initiated by the employer in terms of its policy. Once approved, the benefit can be taken as a lump sum or an annuity, subject to tax regulations. This benefit is fully insured by the fund, and the claim process is managed through the fund in co-ordination with the insurer.
The unapproved benefit is activated after a three-month waiting period and pays for up to 22 months. It requires employer involvement to initiate the claim.
The approved benefit kicks in only after the 24-month waiting period, provided the insurer confirms permanent disability. The process starts with the employer initiating the temporary income disability benefit, after which the fund processes the approved claim.
Bouah’s claim concerned an income disability policy held directly by Sun International, in other words, an “unapproved benefit”.
As a result, neither the Sanlam Umbrella Provident Fund nor its administrator, Sanlam, could assist Bouah in submitting his claim. Only Sun International, as the policyholder, has the authority to lodge the claim with Old Mutual.
What qualifies as a complaint under OPFA?
The OPFA held that Bouah’s case does not fall within the definition of a complaint as contemplated in section 1 of the PFA.
In terms of the Act, a complaint is defined as:
“ ‘complaint’ means a complaint of a complainant relating to the administration of a fund, the investment of its funds or the interpretation and application of its rules, and alleging–
(a) that a decision of the fund or any person purportedly taken in terms of the rules was in excess of the powers of that fund or person, or an improper exercise of its powers;
(b) that the complainant has sustained or may sustain prejudice in consequence of the maladministration of the fund by the fund or any person, whether by act or omission;
(c) that a dispute of fact or law has arisen in relation to a fund between the fund or any person and the complainant; or
(d) that an employer who participates in a fund has not fulfilled its duties in terms of the rules of the fund; but shall not include a complaint which does not relate to a specific complainant.”
The OPFA found that the applicant’s complaint does not fall within the definition of a “complaint” in terms of the Act.
PFA’s jurisdiction over disability benefit disputes
The PFA referred Bouah to Sun International, distinguishing between pension-related matters and employer-held insurance policies. Bouah then sought reconsideration, arguing that Sun International should be compelled to support his disability claim.
However, the FST upheld the OPFA’s decision, emphasising that unapproved disability benefits fall outside the Office’s jurisdiction. The Tribunal agreed with the OPFA’s finding that Bouah’s grievance did not qualify as a “complaint” under the Act’s definition and concluded that the OPFA was correct in determining it lacked jurisdiction over disability benefit claims underwritten by insurers.
Additionally, the Tribunal highlighted that Bouah and his employer had reached an inter partes agreement resolving all disputes. Therefore, it found no grounds for Bouah’s appeal to the OPFA, as his complaint was unrelated to a pension or provident fund and fell outside the Adjudicator’s purview.
The application for reconsideration was dismissed.
The FST’s ruling, handed down on 28 October, clarifies the boundary between retirement fund complaints and employer-insurer disputes, highlighting the need for claimants to address such issues directly with their employers and insurers.
For employees such as Bouah, the decision serves as a critical reminder: when it comes to unapproved disability benefits, the OPFA’s hands are tied, and the resolution process starts with the employer.
For employers, the decision highlights a broader responsibility.
Ntokozo Ngubane, senior associate at Norton Rose Fulbright, said the ruling reinforces the importance of clear communication about benefit structures.
“The ruling confirms the need for funds to properly communicate benefit structures to members, as well as member education focused on understanding the nature of contributions received, as well as onward payments to insurers,” Ngubane said.
