EPFO pension scheme for formal workers with basic salary above Rs 15K
Pension fund body EPFO is considering a new pension product for workers in the organized sector who receive a base salary of more than Rs 15,000 per month and are not mandatorily covered by its employee pension scheme 1995 (EPS-95).
At present, all employees in the organized sector whose basic salary (basic salary plus dearness allowance) does not exceed Rs 15,000 per month at the time of entry into service are compulsorily covered by EPS-95 .
“There has been a demand for a higher pension on higher contributions among the members of the Employees Provident Fund Organization (EPFO). Thus, there is an active consideration of offering a new pension product or scheme for those whose monthly base salary is above Rs 15,000,” a source familiar with the development told PTI.
According to the source, the proposal on this new pension product may be discussed at the meeting of EPFO’s top decision-making body, the Central Board of Trustees (CBT) on March 11-12 in Guwahati.
During the meeting, a sub-committee set up by the CBT on pension issues in November 2021 will also submit its report.
The source explained that there are EPFO subscribers who receive more than Rs 15,000 monthly basic salaries who are obliged to contribute less (at the rate of 8.33% of Rs 15,000 per month in EPS-95 ) and therefore they get a lower pension.
EPFO amended the scheme in 2014 to cap basic monthly pensionable salaries at Rs 15,000.
The threshold of Rs 15,000 only applies at the time of entry into service. It was revised upwards by Rs 6,500 from September 1, 2014 in view of price increases and wage revisions in the formal sector.
Later, there were demands and deliberations to increase the monthly base salary threshold to Rs 25,000, but the proposal was not approved.
According to industry estimates, the increase in pensionable wages could have brought 50 lakh more formal sector workers under EPS-95.
“A proposal to increase the salary cap from Rs 15,000 per month to Rs 25,000 per month for coverage under the Employees Provident Funds and Miscellaneous Provisions Act 1952 has been submitted by the Organization of Employees Provident Fund (EPFO) No decision in this regard has been taken,” former Labor Minister Bandaru Dattatreya said in a written response to the Lok Sabha in December 2016.
The source said there is a need to create a new pension product for those who are forced to contribute less or who cannot join the scheme because their basic monthly salary was above Rs 15,000 at the time of joining. service.
The source added that there is no movement to increase the pensionable salary cap by EPFO in the immediate future and in this scenario, the body needs to think about covering formal sector workers who are excluded from EPS-95 due to base salary.
The pensionable salary cap issue is also pending before the Supreme Court. In 2014, the Kerala High Court allowed employees to contribute EPS-95 based on the actual base salaries they received.
In April 2019, the Supreme Court rejected a request for special leave filed by the EPFO against the judgment of the Kerala High Court. In January 2021, the Supreme Court recalled the dismissal order in the petitions for review filed by EPFO.
In February 2021, the Supreme Court blocked the high courts of Kerala, Delhi and Rajasthan from bringing contempt proceedings against the Center and EPFO for non-implementation of their verdicts.
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