PenCom directs PFA to stop registration of death benefits for deceased employees

In order to get more people in the working population to plan for retirement, the National Pensions Commission (PenCom) has instructed Pension Fund Administrators (PFAs) to discontinue the registration of Death Benefits Accounts (DBAs) for deceased employees under the Contributory Pension Scheme (CPS).

A public notice released by the Commission indicated that the practice of opening such accounts was in conflict with the Pension Reform Act, 2014 (PRA, 2014).

Section 11(1) of the Pension Reform Act (PRA) 2014 mandates every eligible employee to maintain a Retirement Savings Account (RSA) with a Pension Fund Administrator of his/her choice.

The Act also mandates every employer to open a nominal RSA within six months of assumption of duty for the employee who fails to open an RSA in accordance with section 11(5) of the PRA 2014.

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Employers are therefore required to ensure that RSAs are opened for all their employees, the commission stated.

Prior to the PRA 2014, Death Benefits Accounts (DBA) have been used by legal beneficiaries to access the benefits of the deceased employees who did not open RSA during their lifetime.

However, pursuant to the above-cited statutory provisions, PenCom says this practice is no longer valid.

Accordingly, “the general public is hereby notified that the processing of DBA for death benefits claims would be discontinued with effect from 1 February, 2020. All PFAs have been directed to stop the opening of DBAs with effect from 31 January, 2020,” the notice read in part.

The National Pension Commission reiterates the need for all employees to ensure that they open RSAs with any PFA of their choice, adding that a list of licensed PFAs can be found on the Commission’s website.