Issue: June/August 09
Edutorials
Old Mutual Corporate

Retirement-fund trustees’ guide to unclaimed benefits un trust

Gould
marketing director of Fairheads Benefit Services

With unclaimed benefits running into many millions of rand, they’re clearly a major problem. At last, government has acted.

An amendment to the Pension Funds Act provides for creation of individual unclaimed-benefit funds by private-sector companies. Once registered, these funds may open a bank account, transfer unclaimed assets and be managed as separate entities with their own trustee boards. Their core focus is to pay unclaimed assets to traced beneficiaries.

Who’s responsible?

The challenge of tracing beneficiaries is well known in the umbrella-trust and beneficiary-funds industries. The responsibility for unclaimed benefits lies with trustees of the trust or beneficiary fund. They are obliged to manage a benefit so that the beneficiary enjoys the benefits from it right up until the termination date.

When is a benefit ‘unclaimed’?

Many beneficiaries might be unaware that a trust has been set up for them because, in the past, trust fund administrators could set up a trust without retirement funds verifying the contact details of dependants. Or trust fund administrators might lose contact with beneficiaries, particularly those in remote areas.

This can happen when guardians or beneficiaries change their contact details without notifying the trust fund administrator, or when they don’t complete an annual “certificate of existence”, causing their monthly distributions to cease.

What are the key timelines?

A benefit is legally “unclaimed” if, after 24 months from date of accrual, the beneficiary can’t be found. Where there’s a sub-account of a trust or beneficiary fund, a benefit accrues when monthly payment is due or when the minor becomes a major.

In other words, if a beneficiary or guardian cannot be found within 24 months, the income portion that’s due becomes an unclaimed benefit; similarly, if a beneficiary cannot be found for 24 months after the termination date, the entire benefit becomes unclaimed.

What must I do as a trustee?

Retirement fund trustees play an important role in monitoring the steps taken by trust/beneficiary fund administrators to manage their databases efficiently and track beneficiaries who may have become “lost”.

Checklist:

  • Unclaimed benefits fund: Does the trust/beneficiary fund admini-strator intend setting up such a fund following the recent legislation?
  • Unclaimed benefits policy: The board of a trust or beneficiary fund should draw up a proactive policy that outlines how unclaimed benefits will be treated. The policy should include ongoing communication with all stakeholders, as well as short- and long-term investigation procedures. Ask to see the unclaimed benefits policy.

Many companies have set up their own tracing initiatives. Call centres have been established, advertising is in place and tracing agents are incentivised to find beneficiaries.

At Fairheads we have an in-house tracing system. Success has been phenomenal. Within a year, the team has achieved an average 74% success rate across all Fairheads-administered umbrella trusts and beneficiary funds.

What else can trustees do?

Once a beneficiary is untraced, the trust/beneficiary fund administrator may request assistance from your retirement fund. Its records, and colleagues of the beneficiary, could provide valuable information for the tracing process.

If you are approached by a dependant of a deceased member, who suspects that there may be an unclaimed benefit in his or her name, you can check in your resolution records whether a trust fund or beneficiary fund account was established. You can call the trust/beneficiary fund administrator’s office to help determine whether this is the case.

How to go about claiming?

The trust/beneficiary fund administrator will do necessary security checks to determine whether a person is the rightful beneficiary, and then proceed either to pay arrear income or the termination benefit.

Who makes good on claims?

For as long as the benefit is with the trust fund administrator, the board of the trust or beneficiary fund is liable to make good the claim. If the benefit has been transferred to an unclaimed benefit fund, the trust/beneficiary administrator or board should be able to direct you even if the benefit has been paid over to the guardians’ fund.