Are You Getting the Pension Provisions You Deserve?

Study says mistakes are rampant, often because of inefficiency, and they're always in the insurer's favor.

Financial transactions between employers and provident and pension funds go astray about 10% of the time, according to pension consultants Shahar Levi and Dudi Hershberg.

In a report they compiled for Hashavim HPS Business Information, Levy and Hershberg found that every single company surveyed had made mistakes. Nor were they small: the mistakes that caused tens of thousands of shekels of losses to employees, employers or both. The financial damage caused rus to tens of millions of shekels a year, say the two men.

Their report cites two main reasons: confusion - the splitting of payments between provident funds and pension funds, and technology - the lack of compatibility between the employers' computer systems and those of the pension and provident funds.

"In the past, all pension provisions for all the workers [at a given workplace] were sent to just one single pension fund. That meant that the probability of mistakes in managing this money was small," explains Levy. Today a given company may route provisions to a number of pension schemes, and to complicate matters more, workers often switch their savings from one fund to another. The result is complications, and mistakes.

Among the most common mistakes found by Levy and Hershberg was wrong division of monthly deductions for severance pay, provident funds and disability insurance.

The power of the typo

The normal (combined employer-employee) provisions for these three purposes is 10% of the employee's wages for the provident fund, 8.33% for severance pay and 2.5% for disability insurance.

The most prevalent mistakes are typing errors that result in faulty distribution between the provident fund and the severance pay fund.

Then there's the issue of simple inefficiency. Levy and Hershberg also discovered that "sweetheart terms" that a given group of workers think they've locked in, because they're anchored in a special wage agreement, are not always implemented. Also, disability insurers cannot always keep up with and apply the changes in their policy details.

Insurance companies, pension funds and provident funds can benefit from sums of money that have accumulated from mistakes in financial transactions that were not discovered immediately, even though deriving such benefit is illegal.

Somehow, all the mistakes are always in favor of the insurer or the bank. They are always to the detriment of the workers and the insured employers, note Levy and Hershberg.

To reduce the likelihood of mistakes and track the movement of money, Levy and Hershberg advise following the account statements sent by the insurers. Diligently check whether the monies the employee and employer deposit reach their destination by comparing the deductions recorded on the pay slips and the deposits listed in the statements, to make sure the money is divided properly between the insurance savings plans.