The Employees’ Provident Fund Organisation (EPFO) has issued new guidelines regarding the management of reserves and surplus funds in exempted establishments.

The retirement fund body, in an order issued to all regional provident fund offices, has clarified how these funds can be used to credit interest to beneficiaries and addresses concerns about equitable distribution among them.

This order assumes significance in the backdrop of some exempted establishments seeking permission to allocate surplus funds to beneficiaries at higher interest rates than those set by the EPFO.

These requests often arise during the surrender process of exemption from EPFO regulations.

The EPFO has thoroughly reviewed these requests and found them to be problematic. An inflated reserve indicates that past earnings have not been fairly distributed among all beneficiaries. Higher earnings should be reflected in the interest credited to these individuals.

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EPFO interest crediting rules

Interest for beneficiaries must be credited on a monthly basis, starting from the last day of the financial year. No interest can be credited for partial years.

The interest rate credited to exempted trusts should align with the actual earnings of the fund. Overdrawing from reserves is strictly prohibited.

Any attempt to distribute reserves among a select group of beneficiaries violates trust laws and principles of fairness. Such actions may lead to audits and compliance checks to ensure adherence to the regulations.

Transfer of funds

Upon cancellation or surrender of exemption, all remaining funds, including undistributed interest, must be transferred to the Central Board of Trustees (CBT), EPFO.

This order replaces previous circulars issued on the same topic, ensuring that all stakeholders are aligned with the updated guidelines.

EPFO’s new directives aim to promote fairness and transparency in managing the reserves and surplus of exempted establishments. These guidelines ensure that all beneficiaries receive equitable treatment and that surplus funds are managed in compliance with legal standards. All regional offices must communicate these updates to relevant establishments for proper regulation, the EPFO order said.