Higher pension: EPFO clarifies on corpus reallocation from EPF to EPS and time limit for diverting additional dues

The Employees’ Provident Fund Organisation (EPFO) issued a circular on Thursday clarifying how EPS contributions will be calculated for those opting for higher pension. If there is enough balance in the Employees’ Provident Fund (EPF) account, the past dues will be transferred to the Employees’ Pension Scheme (EPS) account. However, if there is a deficit, the pensioner or employee will have to pay from their bank account. The circular also stated that pensioners may be given up to 3 months time to deposit and to give consent for diversion of these additional dues.

“Implications under the May 11, 2023 circular will only trigger for those eligible pensioners who have already opted for a higher pension amount under the EPS. Hence, it seems unlikely that during the three-month period provided for obtaining consent/depositing balance amount in EPS, the pensioners would have an option to exit from the same. It will be interesting to see the nature of consequent actions that may be taken by EPFO in case the pensioners choose to exit after having opted for higher pension earlier. Whether the three-month period is sufficient or not would depend upon several factors such as smooth functioning of the mechanisms and processes laid down and the cooperation extended by the authorities,” said Vaibhav Bhardwaj, Partner, IndusLaw.

The Central Government on May 3, 2023, issued a notification citing the provisions of the Code on Social Security, 2020, requiring an additional allocation of 1.16 per cent of employer's contribution towards EPS for employees who choose to receive a higher pension.

EPFO circular states that to give effect to the notification there will be need to undertake following points:

i. In all eligible cases of joint Options, there will be a requirement for accounting 1.16% additional contribution on the pay above Rs 15,000 per month of the employer share to the Pension Fund.

ii. Similarly, in eligible cases of Applications/Joint Options, where past remittances on higher pay were made in Provident Fund but not in Pension Fund, adjustments will be required for 8.33% contribution from the employer's share.

iii. In case of acceptance of joint option of members who are still in service and OIC has passed the requisite speaking order, the present employer shall continue to pay pension contribution on higher wages in future also including the increased 1.16% on wages above Rs 15,000 per month.

The dues will be calculated by the Field Office after the verification of wage details submitted by the employer(s) and taking care of following in the process:

i. Each member/pensioner’s case shall be processed in a separate file, created in e-office with clear marking of the Application ID (system generated acknowledgement number for online application for validation/joint option).

ii. In case of exempted establishments, the wage details for the entire period and the matching contribution should be available with the exempted establishments and consistent with the records of the Trust.

Dues should be calculated month wise in the following manner:

i. 8.33% of employer's share on higher pay (w.e.f. 16.11.1995 or the date the pay exceeds the wage ceiling; whichever is later) will be calculated as per records.

ii. 1.160/» of employer share on higher pay above Rs 15,000 per month (w.e.f. 01.09.2014) will be calculated as per records towards increased contribution.

iii. All amounts already deposited into Pension Fund shall be deducted from sum of (i) and (ii) above.

iv. The interest to be charged on dues as calculated above shall be the interest earned by the members on their PF accumulations.

a. For un-exempted establishments, the interest shall be calculated at the rate declared under Para 60 of EPF Scheme, 1952.

b. For exempted establishments, the interest shall be calculated at the rate declared under Para 60 of EPF Scheme, 1952 or at the rate declared by the Trust of exempted establishment from time to time, whichever is higher, if any.

Method of payment by the pensioners/members

In category 6(i) and 6(ii), there will be no requirement of any additional deposit by the pensioner/member. The contributions due with interest receivable may first be diverted from the PF balance in respect of 6(ii) and 6(iii). In Category 6(iii), deposits will be made by the concerned pensioner/member only from the bank account available in EPFO records.

The deposits may be made as under:

a. Any online facility, if provided by EPFO.

b. Cheque (payable at par at all branches) drawn in favour of concerning RPFC (and as communicated in the demand letter issued by FO). It is to be ensured that Cheque should have following details on its back side:

• Application ID

• UAN/PPO number

• Name and Mobile number

• Demand notice number and date

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