National Pension System: Fresh guidelines on refund of employee’s share due to death, disability

National Pension System: The Department of Pension and Pensioners’ Welfare (DoPPW) has issued fresh guidelines that address the refund of the employee’s share of the National Pension System (NPS) along with returns in situations of death, disability, or invalidation before the notification of the CCS (Implementation of NPS) Rules, 2021.

This directive, issued by the DoPPW under the Ministry of Personnel, Public Grievances, and Pension, aims to provide clarity and assistance to government employees and their beneficiaries regarding the refund of NPS contributions in the event of the accountholder's death.

The National Pension System (NPS) was implemented in January 2004, requiring new central government hires to participate, with the exception of members of the Armed Forces. Adjustments were made to current pension regulations to guarantee that employees hired prior to January 1, 2004, remained under the CCS (Pension) Rules, 1972, and the CCS (Extraordinary Pension) Rules, 1939.

Here are the top points:

1. As per the new guidelines, In the event of the subscriber's death, or discharge from service due to invalidation or disablement, their family members or the government servant will receive benefits according to the Central Civil Services (Extraordinary Pension) Rules, 1939 or the Central Civil Services (Pension) Rules, 1972. The government's contribution and any returns accrued in the subscriber's accumulated pension fund will be transferred to a government account.

“If on death of the subscriber or his discharge from service on invalidation or disablement, benefits are payable to the family members /Government servant under the Central Civil Services (Extraordinary Pension) Rules, 1939 or the Central Civil Services (Pension) Rules, 1972, the Government contribution and returns thereon in the accumulated pension corpus of the subscriber shall be transferred to government account,” the Office Memorandum said.

2. “The remaining accumulated pension corpus shall be paid in lump sum to the Government servant or the person(s) in whose favour a nomination has been made under the Pension Fund Regulatory and Development Authority (Exits and Withdrawals under National Pension System) Regulations, 2015, as the case may be.”

3. To help ease the challenges faced by employees hired after January 1, 2004, temporary benefits were granted under the CCS Pension Rules in 2009 for individuals who experienced death or discharge due to disability. However, these benefits were subject to being adjusted against final payments according to the new rules.

4. In 2015, new regulations specified that in the event of a subscriber's death, if benefits were claimed under the CCS Pension Rules, the entire accrued pension wealth would be transferred to the government. This transfer encompassed both the government contribution and the subscriber's accumulated corpus.

5. As of January 1, 2004, these guidelines have been put in place to ensure that the employee's contribution, along with returns, is reimbursed to the nominee or legal heirs, along with interest calculated from the date of death or discharge until the payment is made, based on Public Provident Fund rates.

6. In cases where benefits have already been granted under CCS rules, it is specified that if the government contribution was not deposited into the government account, a refund will be required upon exiting from NPS, including interest calculated at applicable rates.

The purpose of this memorandum is to promote transparency and provide support to government employees and their families, guaranteeing that they receive their entitled benefits in the event of unexpected circumstances.