EPS-95 higher pension: Bombay High Court rules in favour of private sector employees

The Bombay High Court has ruled that the Employees’ Provident Fund Organisation (EPFO) cannot reject eligible private sector employees’ applications for higher pension under the Employees’ Pension Scheme (EPS), 1995, solely because their employer’s provident fund (PF) trust rules restrict contributions to the statutory wage ceiling.

According to a report by Livemint, the October 19 judgment, delivered by Justice Sandeep V. Marne, set aside EPFO orders rejecting applications from more than 40 employees of establishments including Abbott India, Tata Communications, Raymond Steel and BEST Undertaking. The court directed EPFO to process and allow the employees’ joint-option applications within eight weeks.

Why did EPFO reject the applications?

Some employers operate their own PF trusts because their establishments are exempted from the standard EPF arrangement. EPFO had rejected certain higher-pension applications on the grounds that these trusts’ internal rules capped contributions at the statutory wage ceiling or did not expressly permit employees to exercise the joint option for a higher pension.

The employees challenged the rejections, arguing that the rules governing their employers’ PF trusts could not override their entitlement under the EPS, 1995.

The joint option allows eligible employees and employers to seek a pension calculated on higher wages, subject to the scheme’s conditions. Employees who contributed to the PF on actual salaries exceeding the applicable wage ceiling may qualify for the higher-pension benefit, provided they meet the prescribed requirements.

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What did the Bombay High Court say?

The court held that an employer’s PF trust rules could not, by themselves, be used to deny an otherwise eligible employee the opportunity to seek a higher pension.

According to Livemint, the court observed that PF trust rules generally govern provident fund contributions and do not determine an employee’s entitlement to a pension on higher wages under the EPS.

The judgment stated: “A joint option cannot be rejected on the ground that the Trust Rules either envisage a cap /ceiling or employer’s contribution or that Trust Rules did not provide for joint option on higher pension on the ground that employer did not remit pension contribution on the wages exceeding the ceiling.”

The court also considered the Supreme Court’s judgment in EPFO v. Sunil Kumar B., which upheld the 2014 EPS amendments. The Supreme Court had held that eligible employees who contributed to the PF on actual wages exceeding the statutory ceiling could not be barred from exercising the higher-pension option solely on that basis, subject to the scheme’s conditions.

The Bombay High Court further addressed situations in which employers could not produce historical records. It noted that alternative verification methods, including providing employees an opportunity to be heard, should be considered where relevant records were unavailable.

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What happens next for the employees?

The High Court set aside the EPFO orders rejecting the applications and directed the authorities to process and allow the petitioners’ joint options within eight weeks. The petitions were allowed, with no order as to costs.

Does this mean all EPFO members qualify for a higher pension?

No. The ruling does not automatically make every EPFO member eligible for a higher pension. Employees must satisfy the applicable eligibility criteria and other requirements, including those relating to contributions and documentation.

The judgment clarifies that restrictions in an employer’s PF trust rules alone cannot be used to deny an otherwise eligible employee the statutory higher-pension option. The ruling therefore offers relief to the petitioners while reinforcing the distinction between PF trust rules and pension eligibility under the EPS, 1995.

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