The Employees’ Provident Fund Organization (EPFO) has been constantly enhancing the digitisation framework with the ultimate goal of paying out provident fund (PF) and pension (EPS) claims in a timely manner post retirement to subscribers or to their nominees on a member’s demise. Towards this, the processes have been made simple, transparent and technology-driven. Launching of the e-Nomination facility on the EPFO members portal is yet another step in this direction aimed at accelerating the settlement of PF and pension claims.
Nomination and its importance
The ultimate objective of maintaining an EPF and EPS account is to ensure that funds are made available in a timely manner to an employee or to his nominee in the unfortunate event of the death of the member. Hence it is important to ensure that every PF / EPS member has provided information on his nominee’s details to enable settlement of funds in a seamless manner. Employers are required to obtain details of nominees at the time of initial membership and onboarding of the employee. A nominee is considered to be a trustee of the funds received and cannot claim ownership of the funds. The nominee needs to distribute funds to the legal heirs of the deceased member. In order to avoid any dispute, it is important that the legal heir is mentioned as a nominee. Typically, a family member should be a nominee. If a member does not have a family he can nominate any one person, but once the member acquires family the earlier nomination becomes invalid. Accordingly, on marriage, a fresh nomination has to be filed.
e-Nomination rules and process
With the introduction of e-Nomination, the onus of updating the nominee details lies on the employee. This is more so since employees have multiple PF accounts, or may not share complete information with the current employers, or old records are unavailable with the EPFO / employers etc. Currently, e-Nomination is optional, but it is expected to be made mandatory in due course.
The e-Nomination facility can be availed only by members who have an active UAN and active mobile number linked and verified with Aadhaar. The photograph of the member should be available on his online profile on the EPF portal.
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The member is required to log-in to the member interface of the unified portal, upload the photograph, if not done so under the ‘View’ tab of the ‘Profile section’, and click on the ‘e-nomination’ button under the ‘Manage’ tab. The details of the nominee can then be provided and the system will seek a confirmation of whether the member has a family or not. If yes, the member should fill the details of family members. It should be noted that Aadhaar and photos of family members are mandatory to complete this section. Thereafter, one should click on ‘Save Family Details’ and proceed to select ‘EFP Nomination details’ and mention percentage share of EPF funds that the member wants to nominate against the family members’ name and save the update of the nomination.
Where an employee declares that he has no family, the system will directly take him to the EPF nominations section. EPF nomination is also valid for EPS nomination for members with family. In case there is no family (spouse/son/daughter), the system will direct the member to the EPS nomination section for details. The member is required to e-sign to complete the e-nomination process. E-sign can be done by generating a virtual ID (which is mandatory) by visiting the UIDAI official website.
Benefits and Challenges
This will go a long way in ensuring speedier and correct settlement of claims in the event of the death of the member, to avoid financial hardship to the family. It will also reduce family disputes if nominations are done correctly and in a timely manner.
The objective of e-Nomination is to ensure a member to take the ownership of his EPF account and to keep it updated on a real-time basis. It will also help in actuarial valuation of the pension fund, reduce bureaucracy, corruption and help in the faster digitisation of important records, ultimately enhancing employee experience and the ease of doing business.
The primary challenge would be implementation of e-Nomination till the last mile. In case of a member holding multiple PF accounts from past employment, the challenge would be to reconcile the nomination details provided to past employer with the details now updated in the member’s portal. Accordingly, clarity would be required on which nomination would be considered valid. Mismatches in details provided for Aadhaar and PF details will also be a challenge in completing the e-Nominations.
There are many questions that remain unanswered, such as what happens when employees do not have currently active India mobile numbers. This is true not only for International Workers who have repatriated, but also for Indian nationals who are currently working overseas.
The launching of the e-Nomination facility by EPFO is a step in the right direction. It is also important to support the process with awareness among members and careful implementation will be crucial for its mass acceptance and success.
(By Saraswathi Kasturirangan, Partner, Deloitte India, and Vivek Mistry, Manager with Deloitte Haskins and Sells LLP)