Chief executive officers and finance directors who deduct pension contributions but do not remit the same to pension funds will face civil and criminal penalties in their personal capacities if the proposed Pension and Provident Funds is passed into law.
Pension contribution arrears is one of the biggest challenges facing the pension sector with about $890 million in unremitted contributions recorded as at 30 June 2020.
When sponsoring employers deduct pension contributions, they are required to remit the same to pension funds. But when they do not remit the contributions, it affects members as they sometimes end up receiving reduced benefits or no benefits at all when they retire.
Currently, penalties for non-remittance of pension contributions are provided for in the pension regulations. However, they are not deterrent enough since they are limited to a level six fine or imprisonment for one year, or both such fine and such imprisonment.
To address this gap, the Insurance and Pensions Commission has proposed strengthening the Pension and Provident Funds Bill to force sponsoring employers to remit contributions.
The Bill, whose objectives include protection of fund members’ and beneficiaries’ interests, is currently before Parliament.
Clause 17 of the Bill states that sponsoring employers shall be required to remit pension contributions within 14 days after the end of the month in respect of which the contributions were payable.
For example, pension contributions for August, should have been remitted to the pension fund by 14 September.
Sponsoring employers who fail to remit contributions within the specified period shall be guilty of an offence and liable to a stiffer category 1 civil penalty.
The pension fund’s principal officer shall be required to report to IPEC within seven days after the end of the 14 days.
A principal officer who fails to report this to IPEC shall be guilty of an offence and liable to a category 1 civil penalty.
Clause 17 (8) states that: “Without derogation from section 385 of the Criminal Procedure and Evidence Act [Chapter 9:07], where a participating employer contravenes this section, the following persons shall be personally liable for the contravention—
“(a) every director or executive officer who is regularly involved in the management of the participating employer’s overall financial affairs;
(b) every person in accordance with whose directions or instructions the governing body or structure of the participating employer acts or who controls or who is regularly involved in the management of the participating employer’s overall financial affairs.”
This will only not apply if it is proved that he or she took no part in the commission of the offence.
Pension contributions arrears date back to the 1990s. Some of these contributions were written-off in 2009 when the country adopted the multi currency system.
There are some sponsoring employers who have also not remitted contributions to their respective pension funds since 2009. This has condemned their former employees to poverty post-retirement. Those workers would have retired confident that they had secured their future, only to find out that they have no income.