If an employer requests that provident fund benefits be withheld from an employee due to misconduct, the trustees of the fund must still independently exercise their discretion to satisfy themselves that a sufficient case against the employee has been established, in order to withhold the benefit.

The Financial Services Tribunal has again considered the withholding of benefits by a fund where the employer alleged fraud, theft or misconduct on the part of a departing member. The complainant resigned 10 July 2017 from KPMG (the employer) after an internal investigation was launched into theft of assets. The employer laid criminal charges on 5 September 2017 and on the same day requested the provident fund to withhold the benefits due to the complainant because ‘we have opened a criminal case against her’. The fund complied with the request but did release that portion of the benefit that was greater than the loss suffered by the employer through the alleged theft.

Although a warrant of arrest was issued against the complainant it was never executed because the address provided did not exist and she could not be located by the police. The Tribunal noted that the fund administrator could have located the complainant.

In the current instance the Tribunal found that the fund did not exercise its discretion as contemplated in section 37D when deciding to withhold the benefit. It did so only on the indication that a criminal case had been opened and without, importantly, any evidence from the employer that supported a prima facie case against the complainant. At the Tribunal the employer tried to overcome this difficulty by providing ‘further reasons’ which set out details of the alleged theft. The Tribunal stated that if the new evidence was an attempt to apply for submission of further evidence, it failed on procedural grounds, but in any event did not establish that the trustees exercised their discretion.

The decision of the Tribunal yet again emphasises the need for trustees to independently exercise their discretion and to satisfy themselves that the employer has made out a prima facie case against a withdrawing member, if funds are to be withheld.