PenCom Revises Regulation on Retirement, Terminal Benefits (III)
The National Pension Commission (PenCom) introduced administrative sanctions in the recently issued Revised Regulation on the Administration of Retirement and Terminal Benefits to guard against delays in the payment of retirement and terminal benefits. PenCom, as previously reported on this page, issued the Revised Regulation for immediate implementation by Pension Fund Administrators (PFAs).
The administrative sanctions are intended to ensure that PFAs process the payment of retirement promptly. The Revised Regulation includes sanctions for PFAs that delay the submission of a retiree’s request for payment of benefits, and other infractions such as negligence in processing retirement benefits. The following are the key administrative sanctions introduced by the Revised Regulation:
Delays In Submitting Requests For Benefit Payment
The Revised Regulation provides that if a PFA delays submitting a request for payment of benefits to the Commission for approval for more than ten working days from the date of submission of relevant documents, the PFA must pay an administrative sanction of N 200,000 plus N 20,000 for each day the delay continues. An employee may access their RSA as a result of mandatory retirement, compulsory retirement, medical retirement, or temporary loss of employment/disengagement. It is mandated that PFAs should speedily process and forward applications from pension contributors/retirees who wish to access their benefits.
Delay In Payment Of Retirement Benefits
PFAs are required to pay a retiree or beneficiary’s benefits once PenCom has approved them. If a PFA fails to pay retirement benefits within five working days of receiving a no-objection letter from the Commission, the Revised Regulation provides that the PFA shall pay an administrative sanction of N200,000 plus N 20,000 for each day the delay continues. It is important to note that before benefits are paid, each PFA must obtain a no-objection letter from PenCom. A PFA and/or PFC that pays retirement benefits without the Commission’s prior approval will face a N 1 million administrative sanction. This is in addition to refunding either the principal amount paid or the lost investment income, whichever is higher.
Discrepancies in benefit payment
The Revised Regulation provides that that a PFA that pays more than the amount specified on the no-objection granted by the Commission shall be liable to refund the amount overpaid and investment income lost as a result of the transaction, unless the difference is a residual amount or a result of return on investment. Similarly, any PFA that pays an amount lower than that specified on the Commission’s no-objection approval must pay an administrative sanction of N500,000 in addition to the differential to the retiree.
Failure To Enlighten Retirees On the modes of accessing retirement benefits
Periodic retirement benefits can be obtained in two ways: through Programmed Withdrawal (PW) and through Retiree Life Annuity (RLA). The Revised Regulation has mandated PFAs to properly educate prospective retirees on the differences between the two modes of receiving retirement benefits. PFAs are now required to make hard copies of the CPS Retirement Pack available to prospective retirees. The pack explains salient issues that would guide retirees and facilitate a smooth retirement process. Furthermore, PFAs are required to advise prospective retirees to visit their websites and familiarise themselves with the CPS Retirement Pack. The Revised Regulation now provides that that a PFA who fails, neglects, or refuses to inform a retiree about the features of PW and RLA to enable the retiree make an informed decision will face an administrative sanction of N 500,000.
Benefits Computation
There are now administrative sanctions for PFAs that are negligent in calculating retirement benefits. The new regulation provides that that any PFA that submits a request to the Commission with incorrect information that is likely to result in the accelerated depletion of a retiree’s RSA balance, must pay an administrative sanction of N 500,000. Furthermore, the PFA shall refund to the RSA both the amount that was overpaid and the lost investment income. A provision has also been made that any PFA that submits a request to PenCom with incorrect information and then requests permission from the Commission to resubmit the request must pay an administrative sanction of N 100,000 per RSA.
It is critical to note that administrative sanctions were introduced to ensure that PFAs comply with the provisions of the Revised Regulation. Furthermore, the Revised Regulation provides that any violation for which no sanction was prescribed would result in an administrative sanction of not more than N 2 million. All sanctions in the regulation shall be borne by the PFA or PFC and paid from its own company funds.
This piece concludes our presentations on the highlights of the Revised Regulation on the Administration of Retirement and Terminal Benefits. The first part highlighted key changes to several existing provisions while clarifying others, the second part focused on several new provisions concerning Pension Enhancement, Voluntary Contributions, and payment under the Micro Pension Plan, among other things, the third part concentrates on Administrative Sanctions for PFA violations.
