Pension contribution arrears: Stiffer penalties for CEOs, finance directors
CHIEF executive officers and finance directors who deduct pension contributions but do not remit the same to pension funds risk civil and criminal penalties in their personal capacities if the proposed Pension and Provident Funds Bill is passed into law.
Employers are required to remit deducted contributions to pension funds as failure to do so affects members who sometimes end up receiving reduced benefits or no benefits at all upon retirement.
According to the Insurance and Pensions Commission of Zimbabwe (IPEC), defaults in remitting pension contributions are one of the biggest challenges facing the pension sector.
About $890 million in unremitted contributions were recorded as at 30 June 2020, said the commission in its latest Consumer Education Newsletter.
While penalties for non-remittance of pension contributions are provided for in the pension regulations, the Commission says these are not deterrent enough as they are limited to a level six fine or imprisonment for one year, or both such fine and such imprisonment.
IPEC expects the proposed Pension and Provident Funds Bill, which is currently before Parliament, to strengthen enforcement of sponsoring employers to remit contributions. Its objectives include protection of fund members’ and beneficiaries’ interests.
According to the Commission, Clause 17 of the Bill will compel employers 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.
Company executives who fail to remit contributions within the specified period shall be guilty of an offence and liable to a stiffer category 1 civil penalty, said the Commission.
“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,” it said.
“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.”
According to IPEC, pension contribution arrears date back to the 1990s and some of these were written-off in 2009 when the country adopted the multi-currency system. Some sponsoring employers 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,” said the Commission.-heral.l.zw
