We are living in unprecedented times, and the COVID-19 pandemic is affecting everyone differently: we are in the same storm but not in the same boa.
The lockdown following the outbreak of the COVID-19 pandemic is resulting in significant financial strain. Many employers are unable to pay salaries or have been forced into a position where they can only pay reduced salaries. This directly impacts contributions to retirement funds with some employers seeking temporary relief from the obligations placed on them by section 13A of the Pension Funds Act.
Retirement funds are highly regulated and not paying section 13A contributions is a criminal offence. The FSCA (Financial Sector Conduct Authority) has responded swiftly by issuing guidance on temporary contribution relief (FSCA communication 11 of 2020 (RF)).
We believe that this form of relief is essential in helping employers and employees during these unprecedented and challenging times.
We were not afforded the luxury of time to train and prepare for the pandemic before it started. We therefore have no choice but to keep adjusting our sails to weather the storm as it unfolds. We have to be resilient and respond to challenges and take advantage of opportunities as they arise.
Never waste a good crisis
This is, however, a great opportunity to accelerate the adoption of new and better solutions. Now is the time to fully embrace technology by having virtual meetings, interacting on a paperless basis, between trustees, employers and administrators. This will not only ensure the vital ongoing functioning of the fund but also brings with it many environmental and other benefits. The same applies to communication with members – while paper-based communication with members has been rendered impossible under current conditions, communication by electronic media is not inhibited at all.
The boards of funds and benefit administrators have an important role to play to protect our members’ interests. This has also been highlighted in the FSCA Communication 12 of 2020 (General): Impact of Coronavirus (COVID-19):
Expectations on Regulated Entities.
The board of a trustees of a fund has a fiduciary duty to act with the utmost good faith towards the fund and in the best interest of all members. The board should keep abreast of risks that COVID-19 brings to the fund and take the necessary steps to mitigate such risks. Contributions should not be reduced nor suspended prematurely. Risk premiums (death, disability, etc) should be maintained to ensure we reduce further future distress.
Benefit administrators should make sure they sustain their operational ability by ensuring contributions are invested timeously and benefits are paid accurately and timeously to members or beneficiaries. Benefit administrators are expected to keep funds and fund members, as well as third parties, informed of any changes to their processes and procedures resulting from the pandemic.
Contact with members is essential
Employers also have a fundamental role to play in protecting our members. This pandemic is highlighting the fact that administrators are receiving inadequate member details from employers. As an example, the board of trustees could have administrators send communication (including benefit statements) to members if the employer is able to provide cell phone numbers and e-mail addresses for all members.
The historical practice of providing minimal member data to the administrators has contributed to the fact that there are billions of bands in unclaimed benefits due to individuals that cannot be traced, most often due to poor and/or inadequate data. Being able to pay these benefits could have provided much needed financial relief during these challenging times. For these and numerous other reasons, it is essential that employers provide administrators with good quality and complete member information.
Every storm, no matter how big and strong, passes eventually
There have been pandemics in the past and humanity has overcome them all. We will get through this pandemic as well. Storms do not last forever. The greater the storm, the brighter the rainbow.
AUTHOR | Geraldine Pelser, Alexander Forbes Technical Specialist: Operational Risk and SAICA RFPG member
