Employees who chose not to make pension payments at a rate over the wage cap and continued to work on or after September 1, 2014, were given new instructions by the EPFO.
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The Employees' Provident Fund Organization (EPFO) has issued a new set of instructions for employees who had not opted for pension contributions at a higher wage than wage ceiling and continued to be in service on or after September 1, 2014, giving them a chance to choose a higher pension just a fortnight before the end of the four-month deadline set by the Supreme Court.
The EPFO stated in a circular dated February 20 that the following individuals can exercise the joint option (by employees and employers) for higher pension contribution: (1) employees and employers who contributed on salary exceeding the then-current wage ceiling of Rs. 5,000 or 6,500; (2) members of the EPS 95 who did not exercise the joint option under the proviso to Paragraph 11(3) of the pre-amendment scheme (since deleted); and (3) members who were members of the EPFO.
EPF providing employee instructions
According to the instructions released on Monday, employees and their employers may exercise a combined option for greater pension payments in accordance with the Supreme Court verdict. Employees who remained to be EPS subscribers on or before 01.09.2014 will have access to an online facility; specifics will be available soon. According to the circular, "Upon receipt, the Regional PF Commissioner should post suitable notice on the notice board and banners for wider public enlightenment."
Employees who had already made contributions on increased pay but had not formally exercised the option will now need to fill out an application at the EPFO regional office. According to the circular, the employee's express approval must be provided in the joint option form in the event that a share has to be adjusted from the provident fund to the pension fund or if there is a need to re-deposit to the fund.
An undertaking from the trustee must be given in the event that monies are transferred from the EPFO pension fund to the exempted provident fund trust. It added that the method of deposit and the formula for calculating pension would be covered by a subsequent circular. "In case of employees of unexempted establishments, refund of requisite employer's share of contribution, the same shall be deposited with interest at the rate declared under Para 60 of EPF Scheme. 1952, till the date of actual refund," it stated.
Previous circulars published by EPFO
The EPFO gave orders last month to re-examine cases of employees who retired before September 2014 and earned a higher pension based on their real wages but did not want to have their pensions linked to higher wages with the retirement fund body.
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 promptly restored to pension on wages up to the maximum of Rs. 5000 or Rs. 6500."
Concerns concerning lesser pension benefits for EPF members who had previously received larger payouts based on higher actual wages than basic wages have been raised by the circular. Before changing any pension entitlement, the EPF has instructed its officials to notify the pensioner in advance and give them a chance to demonstrate their choice of alternative.
Prior to that, a circular outlining instructions for employees whose request for a larger pension based on real 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.
Supreme Court ruling on EPF pension from November
On November 4, the SC upheld the Workers' Pension (Amendment) Plan, 2014, giving EPF members who had previously opted for the EPS another chance to choose a greater annuity during the ensuing 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 increased the window for choosing the new plan by four months. "The High Courts dismissed the post amendment scheme because there was doubt about its legality. Hence, all workers who are eligible to exercise the option but were unable to do so because of how the cut-off date was interpreted should get certain adjustments, the SC had then stated.
The pre-amendment plan 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 revisions were approved by the court. We do not identify any errors in changing the method used to calculate pensionable pay, it stated.
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 by 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 highest pensionable wage at the time was Rs 5,000 per month, but that was later increased to Rs 6,500.
The EPS, which is managed by the EPFO, intends to offer pension to workers once 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. Workers do not make pension contributions.