The Employees’ Provident Fund Organisation (EPFO) has officially issued guidelines that allow a section of its older members to select higher pensions under the Employees’ Pension Scheme (EPS). This announcement was made on Monday, 20 February, which is 12 days before the closing of the four-month window that was allowed to employees by the Supreme Court in its November 2022 ruling that upheld the Employees’ Pension (Amendment) Scheme 2014. It is important for people to know about the pension structure that currently exists.
Under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, no pension scheme was provided. It is important to note that the EPS, administered by the EPFO, was launched in 1995. The pension fund included a deposit of 8.33% of the employers’ contribution towards the PF collection. One should take note of these important details.
Both employees and employers give 12% of the employee’s basic salary, dearness allowance and retaining allowance, if there are any, to the EPF. While the employee’s total contribution goes directly to the EPF, the employer's 12% contribution is divided as 3.67% to EPF and 8.33% to EPS.
The Government of India provides 1.16% for an employee’s pension. It is important to note that the employees do not give anything to the pension scheme.
During the introduction of EPS, the maximum pensionable salary was Rs 5000 per month. The amount was raised to Rs 6,500 later on. On 1 September 2014, the maximum salary was raised to Rs 15,000 per month.
Currently, the pension contribution is 8.33% of Rs 15,000 unless the employee and employer have chosen to contribute an actual basic salary that is more than the pensionable salary.
EPS: Who Gets the Pension?
It is important to note that the EPS provides pensions to employees after the age of 58. The employees have to render a minimum of 10 years of service and retire at 58 to receive the pension.
If any member leaves his or her job between the ages 50 and 57, they can claim an early pension but the amount is reduced.
2014 EPS Amendments
The amendments of 22 August 2014, raised the pensionable salary to Rs 15,000 per month and allowed members along with their employers to give 8.33% of their salaries to EPS.
All EPS members as on 1 September 2014, were given six months to select the amended scheme. This was extendable by another six months at the Regional Provident Fund Commissioner's decision.
What Was the Supreme Court Judgment in November 2022?
It is important to note that fifty-four written petitions were filed by employees from both exempt and unexempted establishments requesting for the amendments to be removed.
A three-judge bench of then Chief Justice of India U U Lalit and Justices Aniruddha Bose and Sudhanshu Dhulia supported the 2014 amendments, however, they extended the time by four months, to opt for the new scheme.
EPFO: 20 February 2023 Circular
The EPFO's latest 20 February 2023 circular instructed its officers to allow the option for higher contribution by:
Employees and employers who had contributed a salary that is more than the wage ceiling of Rs 5,000 or 6,500;
Those who did not exercise the joint option (by employer and employee) while being members of the Employees’ Pension Scheme (EPS 95);
Those who were members before 1 September 2014 and continued to be a member on or after that date.
As per the latest information, the method of deposit, computation of pension, and other details will be announced slowly. The employer and employee will have access to an online facility to opt for a higher pension soon.
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