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Employees’ Pension Scheme (EPS) UPSC NOTE

 


EPFO

  • Employees’ Provident Fund Organisation (EPFO)

  • Established by an act of Parliament of India, to provide social security to workers working in India.

  • It came into force by Employee Provident Fund and Miscellaneous Provision Act, 1952. 

  • EPFO comes under the control of the Ministry of Labour and Employment, Government of India.

Employees’ Pension Scheme (EPS)

  • The EPS, administered by the EPFO, came into being in 1995. 


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EPFO

  • Employees’ Provident Fund Organisation (EPFO)

  • Established by an act of Parliament of India, to provide social security to workers working in India.

  • It came into force by Employee Provident Fund and Miscellaneous Provision Act, 1952. 

  • EPFO comes under the control of the Ministry of Labour and Employment, Government of India.

Employees’ Pension Scheme (EPS)

  • The EPS, administered by the EPFO, came into being in 1995. 


  • The pension fund was to comprise a deposit of 8.33% of the employers’ contribution towards the PF corpus.

  • It makes provisions for pensions for the employees in the organized sector after retirement.

  • 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.

Judgement of SC (November 4, 2022)

  • The present exercise of the EPFO has been necessitated by the judgment of the Supreme Court given on November 4, 2022 in the EPFO versus Sunil Kumar B case.

  • The SC upheld the Employees’ Pension (Amendment) Scheme, 2014 but extended the time to opt for the new scheme by four months.

  • Under Article 142, the SC’s 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 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 New Guidelines?

  • The new guidelines open the window for employees to deduct a sum equal to 8.33% of the actual basic salary (Basic pay+ DA) towards the EPS, helping to accumulate larger corpus and receive a higher pension amount.

  • For subscribers who opt for this, the employers’ share going to the Employees’ Provident Fund (EPF) since September 2014 will be shifted to the EPS, with the interest earned.



  • The Basic Criteria to avail the benefits are:

    • Employees who were members before September 1, 2014, and continued to be a member on or after that date.

    • Employees and employers who had contributed on salary exceeding the wage ceiling of Rs 5,000 or Rs 6,500.

    • Employees and employers who did not exercise the joint option in the previous window while being EPS members.


Impacts

  • In the event of the authorities clearing the applications for higher pension, the pensioners and the subscriber will have to remit to them the amount that represents the difference between the portion of PF contributions transferred earlier to the Pension Fund and what would have to be paid based on actual salary.

  • In the case of the subscribers, a certain portion of the amount lying with their individual PF accounts may even get transferred to the Pension Fund, after their applications for higher pension get approved.

  • As all the pensioners would have received their terminal benefits, they will be required to make their payment separately.

  • In any case, the payment will include interest too, the rate of which will be indicated by the authorities later.

  • Going by what is available on the portal, the entire payment will have to be made in a single tranche.

  • Employers will be required to bear the administrative charges, which are expected to be nominal.


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Concerns

  • The most important issue of concern is the lack of clarity on the amount pension members and pensioners will receive, should their applications be accepted.

  • Those still in service — give their consent to transfer a substantial portion of their PF savings to the Pension Fund. 

  • Though pensioners will have to make payments separately to be considered eligible for higher pension, they would also be keen to know how much pension they would get.


  • In the case of the pre-2014 retirees, it appears that the PF authorities have not yet officially commenced communication on the status of their applications, even though, under the rules, most of these may not stand the test of scrutiny.

  • Employers have the Herculean task of producing physical records for every applicant.

  • The situation is more complicated for establishments that are no longer in existence — there appears to be no way out for their employees and pensioners to apply for higher pension.

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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Employees’ Pension Scheme (EPS) UPSC NOTE
Employees’ Pension Scheme (EPS) UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
https://www.learnerz.in/2023/08/employees-pension-scheme-eps-upsc-note.html
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