By Francis Arinze Iloani
Since 2013, the National Pension Commission (PenCom) declared a battle against employers who deduct pension contributions of their employees at source but fail to remit same as provided in the Pension Reform Act 2004 (now amended 2014).
The PRA 2014 provides in Section 11 subsection 3 that, "the employer shall deduct at source, the monthly contribution of the employee in his employment and not later than seven working days from the day the employee is paid his salary, remit an amount comprising the employee's contribution and the employer's contribution to the custodian specified by the pension PFA of the employee."
By this provision, the employer is expected to remit deducted pension contributions to the Pension Fund Custodians (PFCs) specified by the Pension Fund Administrators (PFAs) chosen by the employees for onward transfer to employees' Retirement Savings Accounts (RSAs) not later than seven days from the date that the employees receive their salaries.
But this provision has remained one of the most flouted in the Act as employers fail to remit pension contributions already deducted at source for more than year.
A source at one of the PFAs in Abuja told Daily Trust in confidence that most of the debtor employers were from private companies that deduct employees' pension contributions and instead of remitting same end up diverting the contributions for other purposes.
Investigation also revealed that government establishments are not left out in PenCom's drive to recover outstanding contributions.
Worried by this development, PenCom in 2013 engaged the services of 173 Recovery Agents (RAs) to go all out against defaulters, find them, uncover their nefarious acts, recover the outstanding contributions and collect penalties in addition to the main contributions of their employees.
PenCom did not take the action in isolation of the Act as the PRA 2004 (as amended) provides in sub-section (6) that "any employer who fails to deduct or remit the contributions within the time prescribed shall in addition to making the remittance already due, be liable to a penalty to be stipulated by the commission."
The Act further provides that the penalty "shall not be less than 2 percent of the total contributions that remains unpaid for each month, or part of each month the default continues and the amount of penalty shall be recoverable as a debt owed to the employees."
Interestingly, between January 2010 and December 2011 alone, the RAs unearthed 15,427 defaulting employers.
Available records indicate that towards the end of 2013, pension contributions and penalties yet to be recovered from defaulting employers totalled N13.33 billion.
Investigation showed that this development is cause for serious concern to the pension industry as delays in remitting the contributions affect the overall returns on investments undertaken with employees' contributions.
An economist, Mr. James Nwabueze, noted that the two percent interest penalty on outstanding contribution provided in the Act for defaulting employers cannot make up returns on the contributions if they were remitted on time and invested appropriately by the PFAs.
"Collecting these monies on time will do the employees more good than going to recover the monies later with meagre two percent interests," he said.
However, he said since the Act provides that a minimum of two percent of the total outstanding contributions should be the penalty, PenCom is at liberty to increase the percentage of the penalty depending on how long the employers kept the contributions.
Meanwhile, a recent gain of PenCom's battle against pension contribution defaults is the recovery of employees' main contributions which employers refused to remit totaling N3.942 billion.
Recovery agents collected from employers a total penalty sum of N1.042 billion as a punitive measure aimed at discouraging employees from the act.
It could be recalled that as of third quarter of 2014, PenCom had recovered N884.83 million contributions and penalties from defaulting employers.
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