Board Authorises Management to Sue Defaulting Member Employers

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By Chishimba Milongo

The LASF Board of Directors in mid 2017 authorised Management to commence the recovery of pension contributions arrears and refunds on Section 28 of the LASF Act through the legal process.

The objective of the legal process was to secure consistent remittances of pension contributions from Councils to guarantee cash flows as well as to secure the debts in court and enter into Consent Orders that would compel councils to pay.

When management presented its recommendation to pursue the legal route, it disclosed that it did not intend to paralyse the operations of councils by engaging the Sheriff of Zambia.

The Fund would systematically assess the city and municipal councils and allow them to make commitments through Court Orders.

It was reported that the Fund has had challenges in the recovery of pension contributions arrears and refunds on benefits payable under Section 28 of the LASF Act.

The position resulted into the Councils owing the Fund the following amounts as at 30th April, 2017:

Pension Contributions                                         K138,614,842.00

Refunds on Section 28 Benefits                         K1,494,326.00

The amounts owed to the Fund continued to increase over the years and there was need to adopt a strategy that would assist in the recovery of the money.

The Auditor General and external auditors had expressed concern on the recoverability of the funds.

Section 20 (3) of the LASF Act requires that all employers remit contributions by the 7th of the following month and if the contributions are not remitted by that day, the Board may charge a 4% interest on the unpaid contributions.

The penalty for non-compliance in the remittance of contributions is not strong enough to enforce compliance.

Refunds

Section 28(3) of the LASF Act requires the employer of a member entitled to benefits under retrenchments, re-organisations, abolition of office and other exit modes from employment due to no fault of the employee outlined under Section 28 (i), shall out of its own revenues refund  all benefits paid  to the member.

The practice by Councils has been that they retrench employees without making adequate financing of the benefits. The only employers that finance benefits under Section 28 of the LASF Act are ZESCO Limited and Lusaka Water and Sewerage Company.

The Ministry of Local Government had tried to intervene by directing Councils to prepare for adequate finances when they retrench employee but the burden was put on the Fund. In certain situations, when the Fund resisted to pay, members resorted to litigation and the Court had indicated that LASF had the right to take legal action against the Councils.

Recently, the Local Government Service Commission (LGSC) indicated to the Fund that individual Councils were responsible for the financing of the Section 28 benefits.

Non Compliance

Management’s assessment was that not much effort had been made by local authorities especially the city and municipal councils to be fully committed to honour agreed payment plans to recover the pension contributions arrears.

Regarding the refunds on Section 28 benefits paid upfront by LASF, the Councils had chosen to neglect their responsibility to pay back the amounts paid by the Fund.