Subscribers to the Employees' Provident Fund who did not choose a higher pension during a previous window now have another choice. In accordance with the Supreme Court's judgment of November 4, 2022, the Employees' Provident Fund Organisation (EPFO) published directions to all of its regional and zonal offices on how employees could apply for higher pensions on Monday.
In a nutshell, the EPFO has now permitted subscribers to earn more than the pensionable income maximum of Rs 15,000 per month, from which employers deduct 8.33 percent of the 'real basic wage' for pension purposes under the Employee Pension Plan (EPS).
The EPFO stated that details on deposit methods and pension computation will be provided in upcoming circulars. This effectively implies that an employee and an employer can sign up jointly, requesting the EPFO to take 8.33 percent of the higher monthly basic income, assuring greater pension accumulation during their working lives.
The EPFO has covered the pending category of workers who continue to be in service on or after September 1, 2014, with this new circular.
"This would need reallocation of capital from the Workers' Provident Fund to the Employees' Pension Scheme from the date of joining membership under these plans. Applications for an increased pension must be filed with the EPFO," said Puneet Gupta, Partner, People Advisory Services, EY-India.
The EPFO administers the EPS, which provides employees with a pension beyond the age of 58. Employees and employers both contribute 12% of their base salary and dearness allowance to the EPF. The full employee contribution goes to EPF, whereas the employer's 12% contribution is split as a 3.67% contribution to EPF and an 8.333% contribution to EPS.
In addition, the Government of India provides 1.16 percent of every employee's pension. Workers do not contribute to the pension program through their PF contributions.
According to experts, more clarification is needed on the terms of pension contribution for employees who remained in service on or before September 1, 2014, but did not take the option for the pension contribution to be tied to increased basic pay. According to a source close to the situation, the option for such employees to pick a greater pension would most likely be adopted in the future.
The EPFO instructed its field officers in a February 20 circular to allow the option for higher contribution by: one, employees and employers who had contributed on salary exceeding the wage ceiling of Rs 5,000 or 6,500; two did not exercise the joint option (by employer and employee) while being members of Employees' Pension Scheme (EPS 95); and three, were members prior to September 1, 2014, and continued to be members on or after that date.
According to Monday's circular, an online facility would be given for workers who remained to be EPS subscribers on or before September 1, 2014, with further specifics to be released shortly.
"Once received, the Regional PF Commissioner should post an appropriate notification on the notice board and banners for wider public dissemination," according to the circular.
Employees who have previously contributed on a higher pay but have not formally exercised the option must now file an application to the EPFO regional office. According to the circular, any sum needing adjustment from the provident Fund to the pension fund, as well as any re-deposit to the fund, would require the employee's specific permission in the joint option form.
