Epfo Issues Guidelines For Higher Pension

Epfo Issues Guidelines For Higher Pension

Workers’ Provident Fund now has another choice for those who did not choose a greater pension during a previous window. The Employees’ Provident Fund Organisation (EPFO) published instructions to all of its regional and zonal offices on Monday regarding how employees should apply for higher pensions in accordance with the Supreme Court’s order from November 4, 2022.

In essence, the Employee Pension Fund Organization (EPFO) now permits subscribers to earn more than the pensionable salary maximum of Rs. 15,000 per month, from which employers deduct an amount equal to 8.33 percent of the “real basic wage” for pension purposes under the Employee Pension Scheme (EPS).

The method of deposit and the formula for calculating pension will be covered in detail in upcoming circulars, according to the EPFO.

In essence, this means that an employee and an employer can enroll jointly and ask the EPFO to withhold 8.33 percent of the higher monthly basic income. This will ensure a larger pension accumulation throughout the course of their employment.

The EPFO has addressed the pending category of workers who continue to be employed on or after September 1, 2014, with this new circular.

“From the date of enrollment in membership under these plans, corpus from the Workers’ Provident Fund must be reallocated to the Employees’ Pension Scheme. The EPFO must receive applications for increased pensions, according to Puneet Gupta, Partner, People Advisory Services, EY-India.

Employees receive a pension through the EPS, which is run by the EPFO, after they turn 58. A total of 12% of the employee’s base pay and dearness allowance is contributed to the EPF by both the employee and the employer. The full employee portion is contributed to the EPF, while the employer’s 12.5% share is divided into contributions of 3.67% to the EPF and 8.33% to the EPS. In addition to this, the Government of India also pays 1.16 percent for employee pensions. The pension plan is not funded by the employee’s portion of PF.

Experts indicated that more clarification is needed regarding the specifics of the pension contribution for workers who remained on the payroll on or before September 1, 2014, but did not choose to have their pension contribution tied to a higher basic salary. According to a source familiar with the situation, such employees would presumably be given the choice to pick a greater pension in the future.

In a circular dated February 20, the EPFO instructed its field officers to permit the option for a higher contribution for the following groups of people: one, employees and employers who had contributed on salary exceeding the wage ceiling of Rs 5,000 or 6,500; two, who had not exercised joint option (by employer and employee) while being members of Employees’ Pension Scheme (EPS 95); and three, who had joined before September 1, 2014, and continued to be a member on or after that date.

According to Monday’s circular, information regarding an online facility that will be made available to employees who continued to be EPS subscribers on or before September 1, 2014, will be published shortly. According to the circular, “Upon receipt, the Regional PF Commissioner shall post suitable notice on the notice board and banners for wider public enlightenment.”

Employees who had previously made contributions based on higher wages but had not formally exercised the option will now need to submit an application to the EPFO regional office. According to the circular, the employee’s express consent must be provided in the joint option form for any sum that needs to be adjusted from the provident fund to the pension fund or any re-deposit to the fund.

An undertaking from the trustee must be given in the event that money is transferred from an exempted provident fund trust to the EPFO pension fund. The EPF Scheme of 1952 stated that “in the case of employees of unexempted establishments, return of the necessary employer’s share of contribution, the same shall be deposited with interest at the rate specified under Paragraph 60 of EPF Scheme. 1952, until the date of actual refund.”

Instructions for re-examining cases of employees who retired before September 2014 and earned a higher pension based on their actual wages but did not want to have their pensions linked to higher wages with the retirement fund body were published by EPFO last month.

According to that circular, “their cases need to be re-examined to ensure that they are not given higher pension from the month of January 2023 onwards, in order to stop over payment, if any, in respect of employees who had retired prior to September 1, 2014, without exercising any option under Paragraph 11(3) or the pre-amended scheme, and have been granted pension on higher wages.”

According to the statement, “Pension in such instances may be immediately restored to pension on wages up to the threshold of Rs 5,000 or Rs 6,500.” Concerns concerning lesser pension benefits for EPF subscribers who had previously received larger payouts based on higher actual wages than basic wages have been raised by the circular.

Prior to that, a circular outlining instructions for employees whose request for a larger pension based on actual salaries was turned down by the provident fund offices was published in December. Members who made pension contributions on salaries that exceeded the 5,000 or 6,500 rupee wage cap and who also exercised a joint option with their employers to make such contributions but whose option was rejected by the PF authorities can now submit an online application to validate their option for a higher pension payout, according to the statement

The Workers’ Pension (Amendment) Plan, 2014 was affirmed by the SC on November 4, giving EPF members who had previously opted for the EPS a second chance to choose a greater annuity over the following four months. Workers who were EPS members as of September 1, 2014 were granted the opportunity to pay up to 8.33 percent of their “real” earnings towards pension, as opposed to the previous ceiling of 8.33 percent of the pensionable salary of Rs 15,000 per month.

By using its authority granted by Article 142, the SC had given voters an additional four months to choose the new plan. “The High Courts dismissed the post amendment scheme because there was doubt about its legality. Hence, all employees who are eligible to exercise the option but were unable to do so because of how the cut-off date was interpreted should receive certain adjustments, the SC had then stated.

The pre-amendment scheme determined the pensionable salary as the average of the wages received during the previous 12 months prior to leaving the Pension Fund. The changes increased this to an average of 60 months before leaving Pension Fund membership.

The Workers’ Provident Funds and Other Provisions Act of 1952 did not include any pension plans when it was first passed. A plan for employees’ pensions was created in 1995 through an amendment, and it called for a deposit of 8.33 percent of the employers’ contribution to the corpus of the provident fund into the pension fund. The maximum pensionable wage at the time was Rs 5,000 per month, but that was later increased to Rs 6,500.

Leave feedback about this

  • Quality
  • Price
  • Service


Add Field


Add Field
Choose Image
Choose Video