Companies and subscribers of the Employees’ Provident Fund are waiting for further clarification on how to opt for higher pension under the Employees’ Pension Scheme. With just 10 days left to meet the deadline set by the EPFO, many are also hoping that it will extend the deadline to opt for the scheme.
In a circular on February 20, the EPFO had finally laid out the procedure for employers and employees to jointly apply for the higher pension under the EPS in order to comply with the Supreme court ruling. But with the March 3 deadline looming ahead when the court mandated four-month window will close, there is a sense of urgency on the part of employers and employees on how to opt for the scheme.
A number of companies have already informed employees about the option to switch to a higher pension under the Employees’ Pension Scheme, but many are still waiting to understand how this option will have to be exercised and which employees would be deemed eligible.
“Apart from the circular, there is no official communication from the PF officer. We are awaiting further details on how to implement the guidelines, what kind of a form has to be used before we inform employees,” said one executive.
There is expectation that the EPFO will issue more detailed guidelines in the next few days, as it had in its previous communication said the method of deposit and computation of pension would follow in a subsequent circular.
“Now employers are writing to jurisdictional Regional PF Commissioners for guidance since the request will have to be made in a form as specified by the RPFC,” noted an expert.
In case of companies with a private PF trust, the manner and method of deducting the interest for higher pension is also a question. Since these trusts declare their own rate of interest, which may be different, though not lower than that declared by the EPFO, there are questions on the rate of interest to be used while making the deductions.
Experts note that employees too need to evaluate whether opting for a higher pension would be beneficial to them.
“There are still several questions which require further clarifications. From the perspective of employees’, whether they should choose the pension option is one such issue. No doubt, pension is based on the contribution made by the employers for their employees but it is guaranteed by the government for the employees and their families. But where employees choose NPS or other annuity plans, can their return be better and with the flexibility of choosing the investment pattern depending on their risk appetite,” noted Kuldip Kumar, personal tax expert and former national leader, global mobility practice, PwC India.
According to R Krupakaran, General Secretary, All India EPF Staff Federation those who retired after 2015-16, should consider opting for the higher pension as it would be advantageous to them. “Subscribers who retired 5 to 10 years ago will stand to gain as the lumpsum that they transfer to the EPS will be given to them as pension,” he noted.
The EPFO has extended the higher pension benefits to employees (members of Employees’ Pension Scheme 1995 who had not availed the option of higher pension benefits prior to 1 September 2014 and even post the amendment to EPS Scheme in 2014. Employees and employers who had contributed on salary exceeding the prevalent wage ceiling of Rs 5,000 or Rs 6,500 per month and did not exercise the joint option and were members before September 1, 2014 will be able to use the window to opt for hiher pension.
“However, the circular expressly restricts the employees to opt for higher pension benefits who had opted for higher pension under EPS Scheme prior to 1 September 2014 but didn’t apply to opt for higher pension under the amendment to EPS Scheme in 2014. Such restriction on the eligible employees being covered under latter category may not be seen as being aligned with the spirit of the judgment of Supreme Court of India,” said Anshul Prakash, Partner, Employment Labour and Benefits, Khaitan