Employees Pension Scheme (EPS)

Context:

Nearly two months after the Supreme Court’s judgment on the Employees’ Pension (Amendment) Scheme of 2014, the Employees’ Provident Fund Organisation (EPFO) has given an opportunity to a section of pensioners to apply for enhanced pension.

Relevance:

GS II: Government policies and Interventions

Dimensions of the Article:

1. Criteria for pension
2. About Employees Pension Scheme (EPS)
3. EPS (Amendment) Scheme, 2014

Criteria for pension

• Such persons were those who had, prior to their retirement, contributed on higher wages — contributions on salary exceeding the ceiling of ₹5,000 or ₹6,500; exercised the option along with their employers under clause 11(3) of the Employees Pension Scheme of 1995 and whose applications were rejected by the authorities.
• In respect of those whose contribution on higher salary was returned or diverted back to Provident Fund accounts, they had also been given an opportunity.
• The pensioners concerned would have to apply online through the EPFO website for getting their option validated.

About Employees Pension Scheme (EPS):

• It is a social security scheme that was launched in 1995. It offers pension on disablement, widow pension, and pension for nominees.
• The scheme, provided by EPFO, makes provisions for pensions for the employees in the organized sector after the retirement at the age of 58 years.

Main features:

• Employees who are members of EPF automatically become members of EPS.
• Both employer and employee contribute 12% of employee’s monthly salary (basic wages plus dearness allowance) to the Employees’ Provident Fund (EPF) scheme.
• EPF scheme is mandatory for employees who draw a basic wage of Rs. 15,000 per month.
• Of the employer’s share of 12 %, 8.33 % is diverted towards the EPS.
• Central Govt. also contributes 1.16% of employees’ monthly salary.
• Maximum service for the calculation of service is 35 years.
• No pensioner can receive more than one EPF Pension.

EPS (Amendment) Scheme, 2014:

• The EPS amendment of 2014, had raised the pensionable salary cap to Rs 15,000 a month from Rs 6,500 a month, and allowed only existing members (as on September 1, 2014) along with their employers exercise the option to contribute 8.33% on their actual salaries (if it exceeded the cap) towards the pension fund. This was extendable by another six months at the discretion of the Regional Provident Fund Commissioner.
• It, however, excluded new members who earned above 15,000 and joined after September 2014 from the scheme completely.
• The amendment, however, required such members to contribute an additional 1.16% of their salary exceeding ₹ 15,000 a month towards the pension fund.

SC’s Judgement

• Under Article 142, the Supreme Court ruling gives EPFO members, who have availed of the EPS, another opportunity over the next four months to opt and contribute up to 8.33% of their actual salaries as against 8.33% of the pensionable salary capped at Rs 15,000 a month towards pension.
• Under the pre-amendment scheme, the pensionable salary was computed as the average of the salary drawn during the 12 months prior to exit from membership of the Pension Fund. The amendments raised this to an average of 60 months prior to exit from the membership of the Pension Fund.
• The court held the amendment requiring members to contribute an additional 1.16 % of their salary exceeding Rs 15,000 a month as ultra vires the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

About Employees’ Provident Fund Organisation (EPFO)

Nodal: Ministry of Labour & Employment

• It is a government organization that manages provident fund and pension accounts of member employees and implements the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
• The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 provides for the institution of provident funds for employees in factories and other establishments.
• It is one of the World’s largest Social Security Organisations in terms of clientele and the volume of financial transactions undertaken.

-Source: The Hindu