FIMA will raise the goalposts for funds, trustees, and service providers materially. Compliance failure under FIMA may lead to imprisonment of up to 10 years and penalties of up to N$ 10 million. In certain instances, even trivial administrative shortcomings can result in imprisonment. Boards of trustees currently often comprise the employers’ senior management members, and imprisonment would automatically disqualify the senior management member from filling any senior position at the employer. As a result, many employers and trustees are contemplating a move to an umbrella fund. We would advise that funds better carry out their decision to move to an umbrella fund before FIMA becomes effective.
Funds must take note of the following few key points applicable once FIMA is in place:
- The fund first has to register under FIMA;
- The fund first has to comply with extensive new requirements of FIMA;
- FIMA has around 600 compliance requirements under chapters 5, 8, 10, and 11;
- The process for transferring business -
- The board of trustees will be solely responsible for all decisions, while currently, the employer still plays a crucial role in the decision to transfer to another fund;
- The board carries extensive statutory liabilities that are mostly not applicable currently
- The process is much more demanding, time-consuming, and costly than it currently is;
- Employees can stop the process, which they currently cannot.
Current Requirements under the Pension Funds Act
- The fund must submit a section 14 transfer application to NAMFISA. The application requires that -
- The rules of both funds must provide for a transfer of business;
- The participating employer must give his written consent;
- The fund must inform the fund members of the differences and changes;
- The P.O. and the chairperson of the transferor fund must declare that the application is complete;
- The P.O. and the chairperson of the transferee fund must declare that the application is complete;
- Both funds must submit their actuary’s certificate in the prescribed format;
- Both funds’ P.O’s must submit a certificate in the prescribed format;
- Trustees have a common law duty to treat members fairly but no criminal liability.
Requirements under FIMA
- Preliminary requirements:
- The fund must register within 12 months of the FIMA enactment;
- The fund rules must meet all the FIMA requirements;
- The Fund must meet all the FIMA requirements from the date of its enactment (including all the requirements of regulations and standards);
- The Fund must establish several policies (communication, code of conduct, outsourcing) and ensure compliance with these policies.
Next month’s newsletter will discuss the requirements specifically relating to an application to transfer to another fund.
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.