Employer's Pension Fund Error Costs Company Nearly 900,000 Shekels

A regional labor court in Beersheba has ordered a company to pay a former employee 889,301 shekels after it failed to transfer his pension contributions for two months of work in 2016. The employee, a maintenance manager at "Mimoun David - Packaging and Chemical Services," worked for the company for only two months in May and June 2016. His June payslip showed deductions for pension contributions for both months, but these funds were never transferred to his pension fund, Menora Mivtachim.

Four years later, in October 2020, the employee became unable to work due to a joint condition. His pension fund denied his disability claim, stating that the condition likely predated his current insurance coverage, as a five-year waiting period had not been met since his contributions resumed with a new employer. This was exacerbated by a gap in contributions, which reset the waiting period for pre-existing conditions.

The company argued that the employee was responsible, claiming he delayed his pension enrollment, provided incomplete information, requested cancellation of insurance, and had misrepresented his health status upon hiring. The court, while criticizing the employee's actions, found a "direct causal link" between the company's failure to transfer the funds and the employee's damages, holding the company responsible.

Despite the employee seeking over 1 million shekels, the court ultimately accepted the calculation of the company's actuary. The awarded compensation will not be reduced by his National Insurance Institute disability payments, but his claim for emotional distress was denied, as were his legal costs.

This case highlights the importance of employers promptly transferring pension contributions and employees verifying that their deductions are indeed deposited into their pension funds. In Israel, employers are obligated to transfer contributions within seven business days of salary payment or by the 15th of the following month. Failure to do so can lead to penalties, including potential imprisonment.