ON 30 AUGUST, 2023 the National Pension Commission (PenCom) issued a press statement, entitled “Outstanding Pension Contributions in the Account of Pension Fund Administrators (PFAs)”. PenCom, in the press release, informed the general public that it observed that some employers are remitting the pension contributions of their employees with incomplete documentation. Consequently, PFAs have been unable to credit the Retirement Savings Accounts (RSAs) of affected employees.
The press release further stated that the list of affected employers and employees can be viewed on its website and those of PFAs. Employers and employees on the aforementioned list were advised to provide the PFAs with the required information to facilitate the crediting of pensions contributions into the employees’RSAs. PenCom warned that it will take appropriate regulatory actions against employers who failed to comply with its directive by 31st December, 2023 in line with provisions of the Pension Reform Act 2014.
The principal objectives of PenCom as provided in the Pension Reform Act 2014 is to enforce and administer the provisions of the Act; co-ordinate and enforce all other laws on pension and retirement benefits; and regulate supervise and ensure the effective administration of pension matters and retirement benefits in Nigeria.
The timeframe of four (4) months PenCom gave defaulting employers to comply is too long because the forwarding of deductions with incomplete documentation by employers is neither an error nor an oversight. It is a deliberate fraudulent and criminal act on the part of such employers, which should not be treated with levity.
Non-compliance with pension laws was one of the weaknesses of the pre-2004 pension reforms pension schemes in Nigeria. The effects of non compliance with the provisions of the Nigerian Social Insurance Trust Fund (NSITF) establishment by Decree No. 73, which made provisions for enhanced social protection to private sector employee’s is still resonating to date, with Trustfund Pension PFA that took over pension assets of NSITF still working to clean the records.
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Under the NSITF, fraudulent employers were submitting cheques for contributions without schedules that should have shown how much to be credited to each employee’s record. It was like sending employees’ salary cheques to the bank without a schedule that will indicate how much to be credited in the bank accounts of each employee. This was being done because what were covered in the cheques were not the correct money to be remitted. Unfortunately, NSITF accepted the cheques without complains because of lack of regulatory supervision and the fact that they were in-turn, not paying retirees their appropriate entitlements.
Section 115 of the Pension Reform Act 2014 empowers PenCom to make regulations, rules and guidelines as it deems necessary or expedient for giving full effect to the provisions of the act. The contravention of any regulation issued pursuant to any of the provisions of the act shall constitute an offense and shall be punishable as prescribed in the particular regulation.
The act also places certain obligations upon employers, which they are bound to comply with.
Section 4(5) of the act provides that in addition to the rates specified in subsection (1) of this section, every employer shall maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.
Employers are avoiding this because they see it as additional contribution. As a preemptive measure to take care of evasion, subsection (6) of the section provides that where the employer fails, refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period.
Section 11(1) provides that every employee to whom the act applies shall maintain a Retirement Savings Account (RSA) in his name with any Pension Fund Administrator (PFA) of his choice. Subsection (5) provides that where an employee fails to open such RSA within a period of six months after assumption of duty, his employer shall, subject to guidelines issued by the Commission, request a PFA to open a nominal retirement savings account for such employee for the remittance of his pension contributions.
Section 11(3) provides that the employer shall (a) deduct at source the monthly contribution of the employee; and (b) not later than 7 working days from the day the employee is paid his salary, remit an amount comprising the employee’s contribution and the employer’s contribution so deducted to the Pension Fund Custodian (PFC) specified by the PFA.
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Subsection 6 of the section provides that an employer who fails to deduct and remit the contributions within the time stipulated shall, in addition to making the remittance already due, be liable to a penalty to be stipulated by the Commission. The duty to deduct contributions and remit same to the Pension Fund Custodian (PFC) specified by the PFA is that of the employer and not the employee.
Non-compliance with the above provisions is illegal, unlawful and a fraudulent act against the employee by the employer. The amount deducted is the money of the employee therefore non-remittance as stipulated in the act amounts to stealing from the employee as the money is supposed to be in the RSA of the employee, to be invested thereby generating additional retirement benefit for the employee.
Penalties for non-compliance with the provisions of the act are imbedded in the act. Section 99(1) provides that “A person who contravenes any of the provisions of this Act commits an offence and where no penalty is prescribed, shall be liable on conviction to a fine of not less than N250,000.00 or to a term of not less than one-year imprisonment or to both fine and imprisonment.”
Section 99 (2) further provides that “Any person or body who attempts to commit any offence specified in this Act commits an offence and is liable, on conviction, to the same punishment as is prescribed for the full offence in the Act”.
Section 103 states that “Where an offence under this Act is committed by a body corporate, the body corporate or every (a) director, manager, Secretary or other officers of the body corporate; (b) person who was purporting to act in such capacity mentioned in paragraph (a) of this section, who had knowledge or believed to have had knowledge of the commission of the offence and who did not exercise due diligence to ensure compliance with the Act shall be deemed to have committed the offence and shall be proceeded against in accordance with this Act”.
The Act places certain obligation upon the employers and empowers PenCom to sanction non-complying employers. Employers are therefore expected by law, to comply with such obligations as non-compliance is unacceptable as it puts the future of the employee at risk and there are sanctions for non-compliance.
Comrade Takor was a two term President of NASU, a two term National Treasurer of NLC and an inaugural member of the Board of PenCom. Comrade Takor retired as a Director in federal service and is now a Lagos-based legal practitioner. He is an alumnus of the National Institute of Policy and Strategic Studies (NIPSS), Kuru-Jos, Plateau State.