EPFO, the retirement fund body, is considering a new pension plan for organised sector workers who earn more than Rs 15,000 per month and are not covered by the EPFO’s Employees’ Pension Scheme 1995. (EPS-95).
At the moment, all organised sector employees whose basic pay (base pay plus dearness allowance) does not exceed Rs 15,000 per month at the time of commencing service are required to be covered by EPS-95.
“There has been demand for higher pension on higher contributions among the members of the Employees’ Provident Fund Organisation (EPFO). Thus, it is under active consideration to bring out a new pension product or scheme for those whose monthly basic wages are more than Rs 15,000,” a source privy to the development told PTI.
According to the source, the idea for this new pension plan could be discussed at the EPFO’s ultimate decision-making body Central Board of Trustees (CBT) meeting in Guwahati on March 11 and 12.
During the meeting, a subcommittee on pension-related concerns established by the CBT in November 2021 will also provide its findings.
According to the source, EPFO subscribers earning more than Rs 15,000 monthly basic wages are required to contribute less (at the rate of 8.33 percent of Rs 15,000 monthly basic wages towards EPS-95), resulting in a smaller pension.
In 2014, the EPFO revised the plan, capping monthly pensionable base wages at Rs 15,000.
The Rs 15,000 threshold is applicable only at the time of joining service. It was increased from Rs 6,500 on September 1, 2014 to Rs 7,500 in response to price increases and pay modifications in the formal sector.
Later, there were calls and discussions to increase the minimum monthly basic pay to Rs 25,000, but the proposal was rejected.
According to industry estimates, increasing pensionable pay might have placed an additional 50 lakh formal sector workers inside the EPS-95 umbrella.
“The Employees’ Provident Fund Organisation has made a request to increase the wage ceiling for coverage under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 from Rs 15,000 to Rs 25,000 per month (EPFO). No decision has been made in this regard “Bandaru Dattatreya, the previous labour minister, claimed in a written reply to the Lok Sabha in December 2016.
According to the source, there is a need for a new pension product for people who are either forced to make fewer contributions or are unable to join the scheme due to their monthly basic salary exceeding Rs 15,000 at the time of commencing service.
The source noted that the EPFO has no imminent plans to increase the pensionable salary cap, and in that case, the organisation must consider providing coverage to those formal sector workers who are excluded from the EPS-95 due to higher basic pay.
The pensionable salary cap is likewise a case before the Supreme Court. In 2014, the Kerala High Court granted employees the right to contribute to the EPS-95 on the basis of their actual basic wages.
The highest court dismissed an EPFO special leave petition challenging the Kerala High Court verdict in April 2019. The apex court recalled the dismissing order in EPFO’s review petitions in January 2021.
In February 2021, the Supreme Court prevented the Kerala, Delhi, and Rajasthan high courts from beginning contempt proceedings against the Centre and EPFO for failing to implement their rulings.
Source: News from PTI
Bhoi Smrutirekha Dharanidhar