an unsustainable defined benefit programme. The only reason the Supreme Court did not accept the employers’ plea that it was unsustainable because EPFO made the case that it was a fantastic solution. But now it is clear that the only sustainable and fair long-term solution to EPS is to end it.
From April 1, 2014, no new subscribers should be brought into the scheme. From that date all employees will indicate to their employer if they wish to pay their entire monthly provident fund contributions (24%) to EPFO or open individual accounts with NPS. EPS should purchase annuities from LIC for all existing members and after that money is transferred, it should be liquidated.
Otherwise the government will have two bad choices: use taxes to fill a hole larger than UTI to pay unappreciated pensions for a small minority of the labour force or force EPFO to continuously reduce benefits by subtly defaulting on its obligations to employees and the Supreme Court. Neither option is fair or desirable to the very people that EPFO is pretending to benefit. Better to scrap EPS and revert to the what EPFO was before this silly adventure began.
Amit Gopal & Manish Sabharwal
Manish Sabharwal is with Teamlease Services and Amit Gopal represents India Life Capital