Edition: March / May 2017


Small town, big issues

SCA rules in favour of NJMPF on the pension choices of municipal employees.

There’s been a turf war between the Municipal Employees Pension Fund and the Natal Joint Municipal Pension Fund. Fought over the issue of whether employees of local authorities in KwaZulu-Natal can join the MEPF, in the Supreme Court of Appeal the three funds associated with the NJMPF have won.

The court held that, as employer, local authorities in KZN are obliged to associate with the three NJMPF funds. The local authorities may only associate with another fund in addition to these three.

The dispute arose over the right of the MEPF to admit, as participating employers and to the exclusion of the three NJMPF funds, local authorities within KZN; also, whether the MEPF could provide retirement benefits to KZN municipal employees. The MEPF had presented to the Imbabazane Local Municipality, in the KZN town of Estcourt, that it was entitled to solicit members from within the KZN province.

The Imbabazane municipality was associated with the NJMPF. However, following the MEPF presentation, 25 Imbabazane employees became members of the MEPF.

Now, in terms of the judgment, the MEPF must pay to Imbabazane all amounts it had received in pension contributions from these individuals. Further, the MEPF is precluded from representing to KZN local authorities that it’s a pension fund which employees may join instead of the NJMPF funds.

The three NJMPF funds asserted that, apart from Durban and Pietermaritzburg, local authorities in KZN could only associate with them. Under the laws by which those funds were established, all employees of KZN local authorities had to be members of one of these funds. The MEPF, having been established under legislation of the former Transvaal, was not entitled to solicit membership in KZN.

For its part, the MEPF contended that there was nothing to prevent them. It had also raised constitutional points on the right to freedom of association.

It appeared from the papers, said Appeal Judge Theron, that the decision to impose a restricted choice of pension funds on KZN municipal employees “enhances the pension benefits of such employees and is to the advantage of municipalities in terms of cost effectiveness”. When interpreting a statute where more than one meaning was possible, he added, “a sensible meaning is preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the legislation”.

In the result, the court emphasised, there was nothing in the legislation and the regulations issued under them that prevents a KZN local authority from being associated with the NJMPF funds “provided that such association is in addition to its association with (these) funds”.

The MEPF was ordered to pay the costs of two counsel incurred by the NJMPF funds.