Edition: October / December 2016
Editorials

CLASS ACTION

A case to answer

Solidarity responds to the GEPF. Another instance of where the application by trustees of fund rules is in dispute.

The attempt by trade union Solidarity to launch a class action against the Government Employees Pension Fund, for it to recalculate the actuarial formula for payment of members’ accrued benefits (TT July-Sept), has been sharpened by the affidavit of Solidarity deputy head Johan Kruger in reply to the GEPF. A similar application filed by the Public Servants Association, representing a host of trade unions in the public sector, largely underpins Kruger’s contentions.

The actual amount of money at stake, and the number of members likely to be affected, are not apparent. Kruger says that this is because the GEPF has chosen not to provide the information.

The GEPF had pointed out that the appointed actuary advises the trustee board, in the actuarial report, on the actuarial factors that should be applied to a fund. These factors are then used to determine members’ benefits.

But such an argument creates the impression, believes Kruger, that the trustee board is simply an innocent bystander with no role to play in the process. He considers this ”a material misconception” of a trustee board’s nature and functions.

The actuarial interest factors, he claims, are not to be automatically adjusted in accordance with the actuary’s report. At best, the actuary makes a recommendation for the board’s consideration. It is then is for the board to accept or reject the recommendation, or refer it back to the actuary for revision. Only once the board is satisfied can it present, as it must, the actuarial factors to the Finance Minister (a respondent in the matter) and employee organisations for consultation.

On none of these criteria, Solidarity insists, had the GEPF satisfied its own requirements. At the meeting where it approved the revised factors, the trustee board had not recorded that its approval was subject to consultation with the Minister or employee organisations.

In the boards’ subsequent letter to the Minister, it neither pointed out that the approval was subject to consultation nor did it make the Minister aware of the procedures in the fund rules by which he had to exercise a discretion in accepting or rejecting the board’s approval.

The GEPF had contended that consultation with employee organisations was achieved because six members of the 16-member board are nominated by the Public Service Co-ordinating Bargaining Council. Kruger counters: ”The (fund) rule does not require consultation with the board of trustees but with the employee organisations. The fund was obliged to consult with the employee organisations individually.”

Moreover, argues Kruger, there has been no ”meaningful” consultation with the Minister. Also, the board’s belated attempt to consult with employee organisations was in violation of the fund rule and not all employee organisations were present. There was no proper consultation within the meaning of the rule and, if the organisations present had approved the amendment, they did so without a proper mandate. ”In the circumstances there is a triable issue to be adjudicated in the class action.”

For its part, amongst other things the Public Servants Association wants the High Court to set aside the GEPF decision and an interdict ordering it to:

  • Consult with the PSA, Minister and employee organisations:
  • Apply the interest factors determined in March 2012 pending a proper consultation process;
  • Recalculate the actuarial interest of members whose memberships terminated after April 2015;
  • Pay such members the difference between the resultant amount and the amount initially paid.