The Employees’ Provident Fund Organisation (EPFO) has issued guidelines to allow a section of its older members to opt for Higher Pension under the Employees’ Pension Scheme (EPS) as per 4th November 2022 judgment of the Supreme Court (SC).
GS II: Government policies and Interventions
Dimensions of the Article:
- About Employees Pension Scheme (EPS)
- EPS (Amendment) Scheme, 2014
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.
- 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.
- 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.
What are the Revised Guidelines for Employee Pension Scheme (EPS)?
The revised guidelines for the Employee Pension Scheme (EPS) have several important features, including:
- Employees can now deduct 8.33% of their actual basic salary (basic pay + DA) towards EPS, which helps them accumulate a larger corpus and receive a higher pension amount.
- Currently, EPS contributions from employees are limited to a maximum of Rs. 15,000 for pensionable salary.
- Employers’ shares going to the Employees’ Provident Fund (EPF) since September 2014 will now be shifted to EPS, along with the interest earned, for subscribers who opt for this.
- To qualify for the benefits, employees must have been members before September 1, 2014, and must have continued to be members on or after that date.
- Additionally, employees and employers who contributed on salary exceeding the wage ceiling of Rs. 5,000 or Rs. 6,500 are eligible for the revised guidelines.
- Lastly, those who were EPS members but did not exercise the joint option in the previous window can now avail of the benefits under the new guidelines.
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