Edition: April / June 2016 Edition
Taking on the employer
Fight in Tongaat-Hulett about whether it favoured itself over the members of its pension fund.
Bruce Moor and Willem Hazewindus, both former trustees of the Tongaat-Hulett Defined Benefit Pension Fund (THPF), have launched an appeal in the KwaZulu-Natal High Court against a determination by the Pension Funds Adjudicator. In having dismissed their complaint concerning the decision by the fund’s board to allocate surplus in the THPF, she had dealt only with surplus apportionments in 2007 and 2007.
Because she had not dealt with the 2012 surplus allocation, contend the former trustees, “for this reason alone the Adjudicator’s decision falls to be set aside”. There are additional reasons, according to their heads of argument.
The 2012 surplus allocation was their main complaint as it had caused the allocation of a “large sum” (part of the fund’s conversion from defined-benefit to defined-contribution and the outsourcing of THPF pensioner members) to their erstwhile Tongaat-Hulett employer. They contend that the allocation was ultra vires the Pension Funds Act.
The essence of the dispute, described in the applicants’ heads of argument, is the manner in which actuarial surplus was distributed at end-June 2012: “Future actuarial surplus can only be distributed in terms of s15C. This was not done by the fund which purported to distribute actuarial surplus under the guise of ‘excess assets’, thereby distributing well over 20% of the actuarial surplus to the ESA in a manner prohibited by s15C.”
Accordingly, the allocation of ‘excess assets’ should be set aside. A new scheme, for the proper allocation of actuarial surplus in accordance with s15C, should be put in place. “Importantly, s15C is the only provision in the Act which provides for the allocation of future surplus,” it’s argued. “No other provisions provide for the allocation of any other ‘surplus’ in any manner.”
Against this, THPF actuary Howard Buck focuses on the fund rule that provides for the allocation of 20% of the ‘excess assets’ to the ESA. Because the 20% of the excess assets allocated to the ESA was less than the total actuarial surplus at the time, the allocation does not contravene s15C.
The applicants counter:
In any event, the correct amount of actuarial surplus had not yet been determined. Once determined, it had to be apportioned:
The applicants allege that, through the allocation of surplus from 2007 to 2012, Tongaat-Hulett had contrived “through a systematic and well-planned strategy” to transfer surplus assets to the ESA and not to the fund members’ surplus account.
They also note that the composition of the trustee board was heavily weighted in favour of the employer. Most trustees were conflicted in that, being senior executives of Tongaat-Hulett, they’d be involved in decisions of both the company and the fund.