Presentation on Ms A.S.E Van Rheede Van Oudtshoorn’s Petition for Recognition of a Non-pensionable Period of Service

Presentation to the Committee on Private Members’ Legislative Proposals and Special Petitions

Presenter: Jeannine Bednar-Giyose | National Treasury | 3 August 2011

Ms Van Rheede’s period of employment

• Employment– On 1 October 2000, Ms Van Rheede Van Oudtshoorn (“Ms Van

Rheede”) was permanently employed by the Department of Justice & Constitutional Development (“the DoJCD”).

– On 30 June 2010, Ms Van Rheede retired from her employment.

– She worked for 9 years and 9 months in total.

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Ms Van Rheede’s contribution to the GEPF and lump sum pay out• Contribution to the GEPF and lump sum payment:

– Ms Van Rheede contributed to the GEPF from the date of her employment until she retired.

– On 12 August 2010, she was paid the lump sum payment that she was due for a period of service of nine years and nine months.

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Ms Van Rheede’s Petition

• Ms Van Rheede is requesting the recognition of a non-pensionable period of service of three months, so that she would have ten years of service, and would be able to qualify to receive a pension annuity, as well as a lump sum gratuity.

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Legislative framework

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Legislative Framework

• Rules of the GEPF─ Rule 10.4 (Application for purchase of service);

─ Rule 14.1.1 (Less than 10 years pensionable service-gratuity);

─ Rule 14.2.1 (At least 10 years pensionable service-gratuity & annuity).

• PSCBC R Resolution 1 of 2006─ Qualification for a medical subsidy.

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Rules of the GEPF & application to the facts

• Rule 14.2.1 provides that if a member has at least 10 years pensionable service to his or her credit, such member shall be paid both a gratuity and an annuity pension benefit.

• However, rule 14.1.1 provides that if a member has less than 10 years pensionable service to his or her credit, such person shall be paid a gratuity pension benefit only.

• Rule 10.4 provides that a member may purchase additional service to be recognised as pensionable service, but the GEF interprets the rule as requiring that an application to purchase service should be done while the member is still in service.

• From the Petition, Ms Van Rheede states that she is aware that she only served 9 Years & 9 months.

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Rules of the GEPF & application to the facts (continued)• She is aware that 10 years consecutive service are required to qualify for

pension benefits (both gratuity and annuity).

• The GEPF could not confirm if Ms Van Rheede applied for purchase of service before exiting from employment, but can confirm that the GEPF has not previously received an application for purchase of service.

• Ms Van Rheede does not indicate in her petition that she had ever applied for the purchase of service prior to her retirement. It appears from the documents submitted with the petition, that she did not apply for permission to purchase an additional period of service prior to her retirement.

PSCBC Resolution 1 of 2006 & application to the facts

• An entitlement to a medical subsidy is government by PSCBC Resolution 1 of 2006.

• A government employee qualifies for a medical aid subsidy if he or she has fifteen years of actual service or ten years of actual service in case of retirement due to ill health.

• The GPAA has advised the National Treasury that they received an application for a continued medical subsidy on the 2nd of July 2010. An error letter was sent to Ms Van Rheede on 3 September 2010, requesting the last salary advice as well as the submission of a choice form where the member selects the benefit he/she chooses. A follow up error letter was written on the 13th of October 2010, and a last error letter was sent on 22 November 2010. The only information that the GPAA received was the last salary advice, but not the choice form, and therefore the GPAA was not able to process the application for a continued medical subsidy.

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PSCBC Resolution 1 of 2006 & application to the facts (continued)

• The GPAA advises that it has been engaging with Ms Van Rheede and provided her with the necessary form to complete. 

• The GPAA advises that Mrs Van Rheede van Oudtshoorn’s application for medical subsidy was finalised last week. In addition to the period of nine years and nine months service that she has completed as a member of the GEPF, Ms. Van Rheede apparently provided additional information regarding previous periods of contract work that she did with the DoJCD. The GPAA has determined that Ms Van Rheede is entitled to a 4/6 subsidy (66.67%) which works out according to the information on the GPAA system, to an amount of R848.00. According to the GPAA, Ms Van Rheede must then pay the difference of R424.00 per month. We are advised that this has been agreed to by the GPAA.

• This money will be paid to Ms Van Rheede’s medical scheme as soon as the GPAA receives a valid claim from the medical scheme.

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PSCBC Resolution 1 of 2006 & application to the facts continues

• If Ms Van Rheede had ten years’ recognised service, the amount of the gratuity that she would be entitled to would be greater, as it would be a payment 36 times the employer’s monthly contribution to the employee’s medical scheme.

• Should Ms Van Rheede be allowed to purchase three months additional service, Ms Van Rheede and the DoJCD would be required to make a contribution. The GEPF prepared a quotation that is valid until the end of July:

• Employee: R1 577-53 plus R143-74, and Employer: R2 734-39 plus R249-15.

• In addition to the above, the GEPF advises that a repayment of the gratuity paid on the 12 August 2010 would be required.

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Financial Implications

• The GEPF in its presentation addresses in detail regarding the financial implications regarding the pension benefits and the medical benefits payments and refunds in Ms Van Rheede’s case.

• It is important for the Committee to consider both the financial implications arising in respect of possible benefits payable to Ms Van Rheede, as well as broader financial implications that may arise.

• Ms Van Rheede received a gratuity of R194 997-02 (R181 158-96 after tax and other deductions) on her exit from the GEPF. If she purchased three months service prior to her exit from the GEPF, she would have received a gratuity of R52 958-14 and a monthly annuity of R1 224-04. According to the GEPF, if Ms Van Rheede retired with more than ten years service she would have received, up to 31 July 2011, a total amount of R63 974-50 (gratuity of R52 958-14 and arrear annuities amounting to R11 016-36). If Ms Van Rheede is authorised to purchase the service, she would owe the GEPF R131 022-52.

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Financial Implications (continued)

• It is unclear whether Ms Van Rheede would be able to pay such an amount. It must be drawn to the Committee’s attention, that if they authorise the purchase of additional service, it would not be appropriate to require the employer, the GEPF, or the National Revenue Fund to cover that amount. Ms Van Rheede would then have received a substantial benefit to which she is not entitled, in relation to other pensioners who have contributed and retired with ten years service.

• The National Treasury has been advised that the matter of medical aid benefits for Ms Van Rheede has been successfully resolved between the GPAA and Ms Van Rheede.

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Financial Implications (continued)

• In addition to the financial implications noted above, it is important to highlight that additional, potentially very substantial financial implications may arise for the government and the GEPF from a precedent of approving the recognition of three months’ additional service for Ms Van Rheede on an ad hoc basis and Parliament passing special legislation. There are potentially a substantial number of former members of the GEPF who might have been in the service for a lesser period than 10 years, and who might be desirous to purchase additional service to qualify for both a gratuity and an annuity. It is not possible to accurately quantify the numbers, but the number of potential former members who may wish to take advantage of such a precedent, and the financial implications, could be very significant.

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Legislative Implications

• In order for three months additional service to be recognized as pensionable service for Ms Van Rheede, it would not simply be possible for the Rules of the GEPF to be amended. The Rules prescribe the relationship between the GEPF and members of the GEPF, the amounts that must be contributed by members and employers to the GEPF, and the benefits that are payable on exit by members from the GEPF through resignation, retirement, or death, as well as to dependents. As Ms Van Rheede has already exited the GEPF and is now a pensioner, the direct relationship that exists between the GEPF and its members no longer exists between the GEPF and Ms Van Rheede as a pensioner. Rule 5 of the Rules specifically indicates that Ms Van Rheede is no longer a member of the GEPF.

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Legislative Implications (cont..)

• If the Committee decides that the additional three month period of service should be recognised, it would be necessary to pass special legislation to provide for the recognition of that period of service.

• That is what had to be done in the matter of Ms Chloe Jemima Kellermann, who petitioned the Committee for the condonation of interrupted service in respect of her late husband, Advocate Abraham Gerhardus Kellermann.

• The Committee’s approval of the condonation of interrupted service required that a special piece of legislation be developed by the National Treasury and enacted by Parliament, the Government Employees Pension Fund (Condonation of Interrupted Service) Act, 2008 (Act No. 43 of 2008).

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Legislative Implications (cont.)

• It is undesirable from a practical and a Constitutional perspective for Parliament to pass special legislation to deal with the matter of one individual, particularly, as in this case, where there are very likely a substantial number of other individuals who have already retired or resigned from the GEPF and would also desire an opportunity to apply to purchase additional service. All of those other people would not benefit from special legislation for Ms Van Rheede.

• Section 36 of the Constitution of the Republic of South Africa, 1996 (“the Constitution”), which deals with the limitation of rights, requires that rights may only be limited by a law of general application. A law cannot be enacted which would specifically limit one individual’s or a very few individual’s rights. Conversely, laws conferring rights and benefits should also be of general application, and laws should not be passed which confer a benefit on a single individual, while other individuals who may be in a similar situation do not benefit.

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Legislative Implications (cont.)

• Section 9(1) of the Constitution, which deals with equality, and emphasises that everyone has the right to equal protection and benefit of the law. The law must address issues in a principled, general, consistent manner based on appropriate policy considerations, and not on an ad hoc, case specific manner.

• It is important that this case must not be considered only in light of the particular facts of the case and the individual involved. It is imperative that the law (in this case, the Rules of the GEPF) be applied consistently, so that situations do not arise where some cases end up receiving preferential treatment in relation to other similarly situated cases.

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Legislative Implications (cont.)

• If this case is handled in a manner that does not appropriately take into consideration the broader context and implications, a precedent would be set which could result in a large number of applications being made to the Committee for other cases to be treated on a special basis, and Parliament may find itself having to process a large number of special pieces of legislation to deal with particular individuals. It would be undesirable for Parliament to set such a precedent, as it would undermine the imperative that the law must address issues in a fair and equal manner.

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Legislative Implications (cont.)

• If there is a problem with the Government Employees Pension Law legislative framework that needs to be rectified, that problem must be considered generally in light of policy considerations and the practical implications of implementing a policy change in relation to all members or pensioners of the GEPF, and the feasibility of implementing any legislative change for all members or pensioners.

• An approach to address the problem in a consistent, policy based manner that is practically implementable would need to be developed. This case should not be dealt with on an ad hoc basis through special legislation.

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The end …..

….. Thank you