EPFO moves to block higher pension for pre-2014 retirees, sparks a row | The Financial Express

EPFO moves to block higher pension for pre-2014 retirees, sparks a row

Tells field offices to examine cases, recover dues if higher pensions were paid

EPFO, money
The exact impact of the move in terms of reduced pension payouts by EPFO is yet to gauged.

In a move that could impact tens of thousands of pensioners, the Employees’ Provident Fund Organisation (EPFO) has asked its field offices to reduce pension payouts to those who retired prior to September 2014, and were granted pension on higher wages without exercising such an option. The officers have been asked to recover the excess pension payments such retirees had received till date.

The move is aimed at reducing the outgo on account of the November, 2022 Supreme Court ruling that upheld the Empliyees’ Pension Scheme (EPS) amendment of 2014, but could lead to fresh litigation, analysts said.

Citing the apex court order on higher pension under EPS, the EPFO has emphasised that the court’s verdict pertains to only those pensioners who had contributed towards the EPS on higher wages and jointly exercised the option with their employers for higher pension, which was denied or the extent of higher contribution was refunded or diverted to their EPF accounts. In a circular issued late Wednesday, the retirement fund body has told officials to restore pre-2014 retirees’ pensions to lower levels and “stop over-payment, if any, in respect of employees who had retired prior to September 1, 2014 without exercising any option under Para 11(3) of the pre-amended scheme, and have been granted pension on higher wages…’

As per the earlier rules of the EPS, Para 11(3) gave members an option to contribute for pension on a monthly salary higher than the cap, which was to be exercised jointly with the employer. The EPFO has said these cases need to be re-examined to ensure that they are not given higher pension from the month of January 2023 onwards, stressing that the pension in such cases may be immediately restored to erstwhile amounts linked to wages up to the ceiling of Rs 5,000 or Rs 6,500 per month.

Before revising any pension entitlement, PF staffers have been asked to issue an advance notice to the pensioner so that he or she has an opportunity to prove the exercise of option under Para 11 (3) before their retirement prior to September 1, 2014.

 “Further, any recovery which may arise after such revision should be done in a staggered and persuasive manner,” the EPFO noted, putting the onus on regional PF commissioners to ‘re-determine the pension entitlement and initiate recovery’.
 The circular has triggered concerns and confusion amongst PF officers as well as experts who have said that this could lead to litigation and haphazard implementation at the field level.

 “Recovery will be a challenging proposition and it could also lead to fresh litigation on the issue. While the objective is to safeguard its funds, the ultimate aim of social security has been ignored,” said a legal expert familiar with the matter. PF officers also said it may be difficult to dig out old records and identify cases and track down pensioners who have been given higher pension. “How will officials be able to divert so much time and resources to look up records and go about reducing pensions,” said an official.

With the Budget session of Parliament starting from January 31, the issue is also likely to be taken up by MPs as it would impact many pensioners whose pensions would be significantly reduced. The exact impact of the move in terms of reduced pension payouts by EPFO is yet to gauged.

As on March 31, 2022, the EPS had nearly 7.3 million pensioners with a corpus of Rs 6.89 trillion. It had disbursed Rs 20,922 crore as pension and withdrawal benefits in 2021-22. The government is understood to be working out the additional pension liability arising out of the Supreme Court ruling.

The missive from the EPFO headquarters has urged offices to exercise utmost care to identify such cases where higher pension was granted on account of any court’s judgement. In such cases, a favourable order shall be obtained from the concerned court citing the order of the Supreme Court before going ahead with stopping or restoration of pension to wages up to ceiling of Rs 5,000 or Rs 6,500, the EPFO has further said.

“…If in any case, pension was revised erroneously, such pension may be immediately stopped and restored to pension on wages up to the ceiling of Rs 5,000 or Rs 6,500 only, in accordance with directions contained in Para 44 (x) read with Para 44 (V) of Hon’ble Supreme Court judgement dated 04.11.2022,” the circular concluded. 

The Supreme Court in its ruling in November 2022 had upheld the EPS amendment of 2014, giving another opportunity to subscribers to opt for the higher pension payout. Employees who were existing EPS members as on September 1, 2014 can contribute up to 8.33% of their ‘actual’ salaries — as against 8.33% of the capped salary — towards pension. However, this part of the order has been suspended for six months, during which time the legislature may bring in amendments to generate additional source of funds to the EPS Scheme.

The EPFO has begun implementing a part of the order and has launched an online facility to enable application for higher pension under the joint option by employees who retired before September 1, 2014.

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First published on: 27-01-2023 at 02:40 IST