EPFO members are eligible for a higher pension: Will you opt for it?

One of the World’s largest Social Security Organisations, The Employees’ Provident Fund Organisation (EPFO) has released a circular for eligible employees to opt for a higher pension under Employees Pension Scheme (EPS).

Earlier, the pension you got was capped at a basic salary of Rs 15,000 a month. Now, it is possible to link it to your actual basic. The last date to apply for the provision of a higher pension is March 3, 2023.

It is also important to point out that this option is not eligible for those who joined the EPF after 1st September 2014.

Now, EPFO has released a new circular on February 20, 2023. The EPFO has issued instructions in compliance with orders contained in Para 44 (iii) & (iv) read with Para 44(v) of Hon’ble Supreme Court judgment dated 04.11.2022 in the matter of Special Leave Petition (C) Nos. 8658-8659 of 2019.

According to the circular “44 (iii) The employees who had exercised an option under the proviso to paragraph 11(3) of the 1995 scheme and continued to be in service as on 1st September 2014, will be guided by the amended provisions of paragraph 11(4) of the pension scheme”

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“44 (v) The employees who had retired prior to 1st September 2014 without exercising any option under paragraph 11(3) of the pre-amendment scheme have already exited from the membership thereof. They would not be entitled
to the benefit of this judgment.”

The circular can be seen by Clicking Here.

Below are some of the prominent guidelines 

1) Create awareness among your employees on Pensions for higher wages.

2) Check whether the employees were contributing PF contributions more than the ceiling limit (5000/6500/15000 from time to time).

3) EPFO will provide a link in the EPFO portal to apply for a higher pension to the employees who joined before 01/09/2014 and working now or retired.

4) They should give a Joint option for higher pension under para 11(3) – The specific format is yet to be released by EPFO, but in the circular, it is mentioned that it should contain a disclaimer and declaration as specified in Circular dated 20.02.2023.

5) They should give undertaking for adjustment of funds from PF to pension and explicit consent of the employee should be there in Joint option form for this. i.e. Joint option form must contain consent for higher pension, disclaimer, and undertaking to adjustment of funds to pension.

6) Exempted establishment, trustee should give undertaking for transfer of funds with interest to pension.

7) How to deposit? How to calculate the amount and interest? – further circulars will be released.

8) Joint Option should be verified by the Employer/Authorized Signatory/HR Manager based on the contributions made.

9) Shortly, EPFO will circulate the URL/portal (one of the URLs is already available in the EPFO Portal) to apply to eligible employees and employees who retired after 01/09/2014.

10) All the applications are to be submitted only digitally, with no manual applications. But it is suggested that to be on the safer side, please submit hard copies of the applications along with all the applicable supporting documents as mentioned in the Notification dated 20.02.2023 and send it either personally or through Regd. Post Ackn. Due or Speed Post to the jurisdictional EPF Office.

11) Please ensure that KYC is approved and Nomination has been done before submission of the application for pension on higher wages.

12) Also gather all the previous year’s EPF deduction data & details from their date of joining/date of the contribution, which were reflected in the Contribution Card in Form 3A of each employee and in Annual Returns in 6A of EPF Act and the connected documents immediately.

Benefits

There will be a reallocation of corpus from the EPF to the EPS scheme from the date of joining the scheme. The main advantage of opting for a higher pension is that it allows you to build a pension corpus, an assured income to dip into postretirement.

You now have the option to increase your pension amount from the Employees’ Provident Fund Organisation (EPFO) by increasing the contribution towards its Employees Pension Scheme or EPS. Under the new rules, you can now contribute 8.33 per cent of actual pay towards the scheme which earlier had a capping of Rs 15,000. 

EPFO Calculation Bifurcation

• As the break-up is concerned 12% is contributed from the employees’ end.
• The EPS members don’t contribute towards EPS. Only the employer contributes 8. 33% of the member’s basic to EPS, out of its total of 12%.
• However, since pensionable salary is capped at Rs 15,000 a month since September 2014 for all EPS members. The 8.33% EPS contribution also remains capped and does not exceed Rs 1,250 per month.
• The entire 12% of the employee’s contribution over and above Rs 1,250 per month goes to the member’s EPF.

There is no such cap now. As per the latest provision of EPFO, you can get a pension linked to your actual basic.