In a relief to several public servants, the Supreme Court has provided more time to join the Employees Pension Scheme (EPS) of the Employees Provident Fund Organisation (EPFO). It also held the provisions of the Employees Pension (Amendment) Scheme 2014 to be legal and valid; however, a few of them which has been endorsed by the apex court may result in lower pension or prevent many from benefiting from the fund.
The order came in response to the appeals filed by the EPFO and the Union Government challenging the Kerala, Rajasthan and Delhi High court judgments which had quashed the 2014 (Amendment) Scheme.
Benefits
1. As per the order those who have not opted for the option to join the EPS and the eligible employees who couldn’t join the scheme before the cut-off date can do so within the next four months.
2. Employees also don't have to make the additional contribution of 1.16% of the salary in excess of Rs 15,000 per month. They can seek other legitimate sources, including the rate of contribution of the employers. The court suspended the implementation of this part for six months to enable a decision in this regard either through an amendment or by framing a new provision under the relevant act. The new law may envisage what to do with the additional amount contributed, including channelizing them to the provident fund.
3. The EPF members who have availed of the higher option but retired before September 1, 2014, will receive the benefits extended before the amendment.
The employees of the companies included under the exempted category where trusts handle the PF amount instead of the EPFO will also get the benefit of the judgment.
Unfavourable aspects
1. The apex court upheld the EPF amendment which prescribed taking the average salary for the last five years instead of last year’s average salary while calculating pension. This may result in a lesser pension. If an employee gets Dearness Allowance and Variable Pay/Grade Pay besides the Basic Pay, then that too will be included and the total amount considered as salary.
Significantly, the court upheld the fixing of the maximum salary threshold of Rs 15,000 per month for calculating the pension of those who haven’t availed of the higher option.
2. If the salary of those who are set to join the service exceeds Rs 15,000 per month, they can’t join this pension scheme.
3. If those who retired before September 1, 2014, haven’t made the option yet, they can’t avail of the option afresh.
The judgment may adversely affect those who retired before September 1, 2014, and obtained a favourable Kerala High Court verdict for a higher pension.
FAQs
Here are a few frequently asked questions about the verdict and EPF.
Question: The verdict makes it clear that the specified amendment in the PF Pension Scheme will be applicable to exempted establishments. Which are the exempted establishments?
Ans: These are organizations that have their own PF trusts. Most of them are big corporate entities. For eg: Reliance, Wipro. Public Sector Undertakings too have trusts. Eg: Bharat Heavy Electricals. They don’t remit the amount to EPFO, but keep to themselves. However, they give the pension component (EPS) to the EPFO. If the normal owner share to the EPS is 8.33%, the share of these entities is 8.67%. This system offers the possibility of getting a pension amount equivalent to EPS or a higher amount that is compatible with the financial capability of bigger institutions. There are nearly 1500 such institutions in the EPFO list.
Question: The Supreme Court has struck down the provision that to become part of the scheme, the members should remit 1.16% of the amount in excess of Rs 15,000 in the salary as an additional contribution. The Central Government has been given a time of 6 months to identify this contribution. It is identified that till this period or till when the Central Government institutes a law in this regard, the remittances of the members will be considered a stopgap. What does it mean by this? Does it imply that one should not contribute for 6 months? Or does it mean that the money remitted during this period will be kept separately?
Ans: Stop gap means a temporary arrangement in place until a permanent system comes into being. Legal experts say till that time when a government system comes into being, the current contribution or share will continue.
Question: Whether those who have entered jobs since September 2014 and have salaries above Rs 15,000 will be included in the pension scheme? As per the 2014 EPFO amendment, those having salaries above Rs 15000 are outside the scheme.
Ans: Though this amendment of the EPFO is not among those struck down by the court, legal experts say that all those who are currently in the service can opt for a higher pension. However, more clarity has to come about in this aspect.
Question: How much time will it take to avail of the new pension as per the Supreme Court order?
Ans: It may take time. The EPFO needs to issue a detailed notification based on the court order. Those who exercise the option should separately calculate the additional contribution to be made to the pension fund and deposit to the scheme.
Question: Should those availing of pension again submit an application for enhanced pension coverage?
Ans: Those who have not exercised the option yet, need to jointly opt with the employer for enhanced pension coverage. This can be done only after the EPFO issues a notification for admitting the exercise of the option.
Question: Certain employees who retired before September 2014 are getting higher pension after obtaining a favourable verdict from the Kerala High Court. These people already exercised the joint option after 2014. Will there be a situation leading to the cancellation of their getting higher pension? If so, do they need to repay the amount they already received?
Ans: The court specifically mentions that those who retired before September 2014 but didn’t exercise the option before that cannot provide the option afresh. In that situation, the pension may get annulled.
Question: Will the nominees of deceased pensioners be eligible to avail of the revised pension as per the new court order?
Ans: These matters should be decided by the EPFO.