Msunduzi wins pension fund suit

2013-05-10 00:00

THE Msunduzi Municipality has saved municipalities across the country millions or rands.

It did this by winning a lawsuit against the Municipal Pension Fund, which wanted to increase the council’s contribution towards its employees’ pensions. On top of this, the fund wanted payment backdated 10 years.

The affair has been drawn out and while some municipalities had taken on the pension fund and lost, Msunduzi tried a different argument and won.

Judge Shyam Gyanda handed down judgment yesterday in favour of the municipality.

It all started in 2002 when the South Africa Local Authorities (Sala) pension fund found itself in financial difficulties. It set a scheme in place that entailed increasing the employers’ (municipalities’) contribution, going back 10 years.

Sala argued that its resolution on the increase was forwarded to the Registrar of Pension Funds and was approved in July 2006.

About 150 municipalities countrywide were affected. Most objected to the retrospective aspect of the amendment and did not pay what was owed.

Sala then took legal action against these municipalities. In these cases Sala won because the courts found that the fund was entitled to make retrospective amendments.

Msunduzi decided to tackle the matter differently after its legal team had studied the documentation relating to the matter.

It argued that the amendment was not compliant with the Pension Funds Act. The team said that the subsequent resolutions taken were inconsistent with the earlier resolutions of the fund. In terms of the obligations of the fund, there was not enough engagement and meaningful negotiations with the employees and municipalities concerned.

The team also argued that the amendment did not reflect the correct increase as recommended by the actuary engaged by the Sala’s board of trustees.

Judge Gyanda ruled that the amendment to the pension fund was invalid and that Sala had not made an adequate case to support its argument. He expressed his disappointment that the matter had to come before the court.

He stressed that the matter dealt with public funds on a large scale and that the parties should have made an effort to come together to resolve their dispute.

Municipal spokesperson Brian Zuma said that to the best of his knowledge, Msunduzi was the first municipality to win an action against Sala. He said the municipality was mindful of the judge’s words that when it came to public funds, greater effort must be made to negotiate a settlement.

“We have already begun to set up meetings with Msunduzi’s legal team and the South African Local Government Association [Salga] to formulate a way forward on this matter for all municipalities,” Zuma said.

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