To make life easier for employees, the government has announced several important changes to the Employees’ Provident Fund Organisation (EPFO) rules. The government claims these steps are aimed at improving the ‘ease of living’ for members. However, these decisions include one change that has become a source of concern for millions of EPFO members. The timeline for premature final settlement of EPF and pension fund has been revised.
Several important decisions taken at the CBT meeting
The 238th meeting of the Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) was held in New Delhi on Monday under the chairmanship of Union Labour and Employment Minister Mansukh Mandaviya. The meeting decided to simplify and liberalize the rules for partial fund withdrawals by EPFO members.
Now, three convenient withdrawal categories have been created for members: Essential Needs (such as marriage, education, or illness), Housing Needs, and Special Circumstances.
Members will now be able to withdraw more frequently — up to 10 times for education and up to 5 times for marriage, compared to only 3 times for both combined.
Also, the minimum service period requirement has been reduced to just 12 months. This means that members can make partial withdrawals only after working for 12 months.
Premature final EPF settlement period extended from 2 months to 12 months
A decision was also made at the meeting that seems to contradict the claim of ‘ease of living’.
Yes, the board decided yesterday to increase the time period for availing premature final settlement of EPF from the existing 2 months to 12 months and final pension withdrawal from 2 months to 36 months.
So, in simple words, members will be allowed to withdraw their provident fund after 12 months of leaving their job and EPS or pension fund after 36 months, in case they want to prematurely settle their EPF account.
The existing rule allowed EPFO members to withdraw 75% of their PF after 1 month of unemployment and 100% after 2 months of job loss.
This rule was especially helpful for unemployed people, as they often need money immediately after losing their job to pay EMIs, children’s education, or meet daily expenses.
Due to this, the new rule is being questioned by many as members won’t be able to use their PF money for 12 months and pension funds for 36 months in case of job loss. They argue that the easy and timely withdrawal of PF money supports members in times of unemployment, as they lack a regular income during those times.
The government’s intention might be to help people protect their retirement savings so they don’t immediately spend it all.
Many EPFO members took to social media to express their disapproval of this particular rule. They say that while the government’s intention may be to help people protect their retirement savings, in practice this could create difficulties for unemployed people.
Summing up…
The EPFO’s new decisions include several good measures that are beneficial to members, such as simplifying partial withdrawal rules, eliminating the need for explanations for withdrawals, and simplifying the online process.
However, the decision to extend the waiting period for full PF withdrawals is being criticised. Experts also say that this new move is a concern for those employees who need to rely on their savings after losing their jobs.