Last Updated on February 20, 2023 at 9:25 pm
Many organisations part of the EPFO are abuzz with discussions and calculations on higher EPS pensions following the Supreme Court’s verdict. Many have even provided deadlines to employees currently in service to opt for a higher EPS pension by transferring a significant portion of their EPF corpus to the EPS. However, at the time of writing, the EPFO has opened its doors to only a small section of eligible employees to opt for a higher EPS pension.
On Dec 29th 2022, the EPFO released the first circular on the matter. It only referred to the following segment of employees.
Para 44 (vi) of the judgement: “The employees who have retired before 1st September 2014 upon exercising option under paragraph 11(3) of the 1995 scheme shall be covered by the provisions of paragraph 11(3) of the pension scheme as it stood prior to the amendment of 2014”.
11(3) of the EPS 1995 scheme before amendment reads: “If at the option of employer and employee, 8.33% of the employer’s contribution on actual salary (higher than Rs 6500) is remitted into the pension fund, such higher salary shall be considered as pensionable salary”.
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Employees who have retired before 1st September 2014 are eligible for higher EPS pension if:
a) as employees, they had contributed on salary exceeding the then prevalent wage ceiling of Rs 5,000 or Rs 6,500; and
b) Exercised joint option under the Employees’ Pension Scheme (EPS) of the pre-amendment scheme while being members of EPS-95, and
c) The EPFO declined their exercise of such an option.
What about employees currently in service?
This extract of the Supreme Court’s judgement makes this clear:
“44(iv) The members of the scheme, who did not exercise option, as contemplated in the proviso to paragraph 11(3) of the pension scheme (as it was before the 2014 Amendment) would be entitled to exercise option under paragraph 11(4) of the post amendment scheme.”
“Their right to exercise option before 1st September 2014 stands crystalised in the judgment of this Court in the case of R.C. Gupta (supra). The scheme as it stood before 1st September 2014 did not provide for any cutoff date and thus those members shall be entitled to exercise option in terms of paragraph 11(4) of the scheme, as it stands at present.”
“Their exercise of option shall be in the nature of joint options covering preamended paragraph 11(3) as also the amended paragraph 11(4) of the pension scheme. There was uncertainty as regards validity of the post amendment scheme, which was quashed by the aforesaid judgments of the three High Courts.”
“Thus, all the employees who did not exercise option but were entitled to do so but could not due to the interpretation on cutoff date by the authorities, ought to be given a further chance to exercise their option. Time to exercise option under paragraph 11(4) of the scheme, under these circumstances, shall stand extended by a further period of four months. We are giving this direction in exercise of our jurisdiction under Article 142 of the Constitution of India.”
Para 11(4) of the amendment says fresh option be exercised jointly by the employer and employee for continuing contribution on actual salary.
So employees who were in service as of Sep 1st 2014, should also be eligible for higher pension. This includes employees who have since retired or are currently in service.
However, none of the EPFO circulars on EPS pension refers to this segment (as per 44(iv) of the verdict) at the time of writing this article (18:15, 14th Feb 2023).
Therefore, all EPFO subscribers still in service or those who retired after 1st Sep 2014 are not yet eligible for higher EPS pension – it will be delayed.
Update 15th Feb 2023: Labour Ministry asks EPFO to speed up work on higher pension.
Update 20th Feb 2023: The circular for higher EPS pension for those who retired after Sep 2014 or still in service has now been issued.
Does the EPFO have the financial capability to dole out higher pensions to this segment of subscribers? The promptness with which the EPFO credits interest each year in the recent past should offer a clue! I won’t be placing any bets in favour of the EPFO.
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