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Key Elements to Be Considered as A Consequence of EPFO Exercise of Joint Option for Higher Contributions!
Key Elements to Be Considered as A Consequence of EPFO Exercise of Joint Option for Higher Contributions!
Original publication: 2023-06-23 15:14:21
Key Elements to Be Considered as A Consequence of EPFO Exercise of Joint Option for Higher Contributions!
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Let Us Take a Brief Look at The Background: The Employees’ Provident Fund Organisation (EPFO) has allowed its subscribers to opt for a higher pension amount by increasing their contribution towards the Employees’ Pension Scheme. (EPS). Only those who were members of the EPF as on September 1, 2014, are allowed to opt for a higher pension. The new rules allow subscribers and their employers to jointly apply for a higher pension under the EPS. Eligible EPF members can apply for higher pension by June 2023. What is the existing pension structure? Both the employee and the employer contribute 12% of the employee’s salary to the EPF. While the employee’s entire part goes to the EPF, the employer’s contribution is split between the EPF (3.67%) and the EPS (8.33%). The contributions are payable on a maximum salary of Rs 15,000. For an international worker, the wage ceiling of Rs 15,000 is not applicable. While an employee can contribute a higher sum towards the EPF, the employer is not obligated to follow it. Who is eligible for pension under the EPS and how much? You have to be an active EPS member with a contribution for at least 10 years to be eligible for a pension at the retirement age. For a regular pension, one must be at least 58 years old. Members can opt for an early pension, provided they have reached the age of at least 50 years. Supreme Court say in its November 2022 judgment on the EPFO higher-pension case? On November 4, 2022, the Supreme Court upheld the Employees’ Pension (Amendment) Scheme, which allowed the employees who were existing EPS members as on September 1, 2014, to opt for higher annuity up to 8.33% of their ‘actual salaries’, as against 8.33% of the pensionable salary capped at Rs 15,000 every month. What does this mean for EPFO and members of EPS? For members and employers, this EPF amendment implies a higher annuity/pension after retirement. If a member opts for a higher pension, the member would have to agree to the transferring of funds from the provident fund to the pension fund going back until September 2014. Who can apply for the EPFO higher pension? The following EPF members are eligible to apply for higher pension by June 2023:- Employees who were members of the EPS prior to September 1, 2014, and who are already making a contribution to the EPS on a basic salary exceeding the capped salary of Rs 15,000 but their request for a higher pension was rejected by the EPF authorities.
- Employees who were members of the EPS as on September 1, 2014, and missed the opportunity to opt for a higher contribution to receive a higher pension after retirement.
- Employees whose contribution to the EPF scheme was higher than the wage ceiling of Rs 6,500 or Rs 5,000, as the case may be, are eligible for higher pension contributions. Such employees must have submitted a joint declaration with their employer to opt for higher pension contributions and their request would have been rejected by the EPF authorities.