The 219th meeting of the central board of trustees of the retirement fund body EPFO, which concluded on Thursday under the chairmanship of Labour Minister Santosh Kumar Gangwar, has green-lighted a few major changes that will affect the 45 million subscribers of the Employees' Provident Fund Organisation. Take a look:
After the meeting concluded, Gangwar told reporters that the board has given an in-principle approval to new centralised payment system for making payment to EPFO beneficiaries. According to him, the present decentralised system not only involves higher cost of transactions and delays in re-credits in case of failed transactions, but also does not provide for Aadhaar-enabled payments. The proposed new system using the National Payments Corporation of India (NPCI) platform would address all these limitations while enabling same-day fund transfer to the beneficiaries.
The EPFO has decided that it is neither legally liable nor financially capable to pay benefit in respect of persons from whom the corresponding "monthly remittances" have not been received, according to the Financial Express. "EPFO does not differentiate between the employees of the un-exempted and exempted establishment under Provident Fund, with regard to the benefits under EPS,1995. However, EPFO has to distinguish between those EPS members who have paid monthly contribution on actual/higher salary to EPFO vis-a-vis those who have paid contribution limited to the ceiling amount or lower amount," said a status note circulated to the Central Board of Trustees (CBT) members.
According to the EPFO, there would be no higher pension entitlement for those from whom the contribution on higher salary has not been received by EPFO. "The settlement on higher wages leads to higher financial outflow than inflow leading to substantial deficit in the pension account. As such pension account will be unsustainable in case liabilities are undertaken without corresponding receipts," the retirement fund reportedly said.
You will get a chance to monetise the fund's equity exposure
The body also approved a proposal for crediting exchange traded fund (ETF) units to provident fund accounts of its members at the meeting. The retirement body had started investing in the stock markets though ETFs in August 2015 and has "invested around Rs 32,000 crore so far in the ETFs. The return on investment is 21.87 per cent but this is notional because the EPFO would get this return only on liquidating this investment," according to the Labour Secretary M Sathiyavathy. Nonetheless, this is way more than the around 8.5 per cent its debt investments earn.
According to The Economic Times, the stock market returns currently aren't factored in while calculating the interest rate declared every year and are not reflected in the subscriber's PF balance sheet. After the implementation of the new policy, which is expected by March-end next year, PF subscribers will have two accounts-one for the 85 per cent money put in debt on which the EPFO will pay an interest and the other for the part invested in equity. The Indian Institute of Management-Bangalore helped devise a formula by which it could credit ETF units to subscribers, added Gangwar.
So, from the next financial year, when you withdraw PF, 85 per cent of the total investment would be paid back along with the accumulated interest. On the equity part, the payment will be calculated by multiplying the number of accumulated units with the prevailing market price of the ETF. The daily also reported that subscribers would have an option to defer the withdrawal of the equity investment for up to three years if he/she feels it will fetch better returns
Better IT-based services to stakeholders
CBT also took note of the recent IT-based initiatives of EPFO to ensure better service to its stakeholders. In line with the government's push towards digital India, a functionality has been developed where member can make online requests for correction in name, gender and date of birth by visiting https://unifiedportal-mem.epfindia.gov.in/memberinterface. In addition, an open functionality has been introduced through which any citizen/present prospective employee can generate his/her UAN on the basis of Aadhaar and link his KYC details. This is helpful because UAN is mandatory for filing the returns and depositing the contributions.
(With PTI inputs)