The labour ministry has informed the Rajya Sabha that till March 9 a total of 1,20,279 applications were filed online at the unified portal of the Employees’ Provident Fund Organisation (EPFO) by employees looking to contribute to the Employee Pension Scheme (EPS-95) above the statutory limits.

The Supreme Court on November 4, 2022, allowed this window to employees in service as of September 1, 2014. The deadline to exercise this option is till May 3 this year.

What is EPS?

The EPFO governs the Employees Provident Fund Scheme, 1952 (EPF Scheme) and the Employees’ Pension Scheme 1995 (1995 scheme).

In most cases 12 per cent of an employee’s salary (basic pay) is deposited in his/her provident fund account and the employer matches it with a 12 per cent contribution. Of the employer’s share of 12 per cent, 8.33 per cent goes to EPS (the pension scheme) and the remaining 3.67 goes to EPF.

For example, even if your salary is Rs 50,000, the maximum amount that qualifies for contribution to EPS is Rs 15,000. If you check your PF balance sheet, 8.33 per cent of Rs 15,000, or Rs 1,250, is contributed as employer’s share to your pension account.

Suppose you want to contribute more than Rs 1,250. It is now possible to invest 8.33 per cent of your salary in the pension fund. The contribution can be as high as Rs 4,165 every month on a basic pay of Rs 50,000.

Amendment in provisions

Through a circular GSR 609(E) dated August 22, 2014, the EPFO amended the provisions of the 1995 scheme and revised the maximum ‘pensionable’ salary from Rs 6,500 per month to Rs 15,000 per month under para 11(3) of the 1995 scheme.

Pensionable salary here is the average monthly pay drawn in the last 12 months. Modifications were made to EPS 95 in 2014 whereby an employee could contribute more.

A six-month window was given from September 1, 2014 to opt for this higher contribution, which worked out to be March 1, 2015.

Many people missed the window and applications made afterwards were rejected and subsequently litigations were filed. The Supreme Court has now given another chance to those employees who had missed that window to apply.

How to register?

The registration request has been put up on the EPFO website. Users need to provide their UAN, name, date of birth, Aadhar number and Aadhaarlinked mobile number to initiate the registration process on the EPFO website. The subsequent stages would require user input that is unique to each member.

Once the application is filled up on the EPFO website, it would reach the employer. If the employer gives clearance, the EPFO will act on it.

What has changed?

Before its amendment in 2014, the 1995 scheme provided an option to the employer and employee: if the contribution was made to the pension scheme at 8.33 per cent of a salary above Rs 6,500, the employer and employee could jointly decide that the pensionable salary will be based on the higher figure.

The 2014 amendment deleted the above provision and Para 11(4) was inserted. This para stated that the existing members as of September 1, 2014, who have been contributing on a salary exceeding Rs 6,500 per month, could continue to contribute on a salary exceeding Rs 15,000 per month.

If no such option was exercised within six months, it would be deemed that the member had not opted for a contribution above the statutory wage ceiling.

Moreover, the contributions to the pension fund made above the wage ceiling shall be diverted to the provident fund account of the member along with interest as declared under the EPF Scheme from time to time.

Supreme Court verdict

The Supreme Court in its order dated November 4, 2022, held that the provisions contained in notification no. G.S.R. 609(E) are legal and valid and asked the PF authorities allow members to exercise the option.

The employees were divided into four different categories:

• Those who were already contributing on a higher salary exceeding the statutory limit and were in service as of September 1, 2014, and had exercised the fresh option jointly with their employers; the pensionable salary for such employees is to be based on the higher salary.
• Employees who were contributing on a higher salary exceeding the statutory ceiling limit and were in service as of September 1, 2014, but had not exercised the option could now exercise it till May 3, 2023.
• Those who had retired before September 1, 2014, without exercising any option under para 11(3) of the pre-amendment scheme, and who have already exited the scheme, would not be entitled to any benefit under this judgment.
• Employees who had exercised the option of contributing on a salary exceeding the statutory ceiling under paragraph 11(3) but who had retired before September 1, 2014, shall be covered by the provisions of paragraph 11(3) of the pre-amendment scheme.

In addition to 8.33 per cent contribution by the employer, the central government contributes 1.16 per cent of the salary every month to the employee’s pension account.

The 2014 EPFO amendment said that the 1.16 per cent should be borne by employees and not the government. Several litigations were filed against this.

The apex court, however, has suspended the operation of this part of their order for a period of six months and during this period or till such time any amendment is made, whichever is earlier, the employees’ contribution shall be a stop-gap measure.

EPFO circular

The EPFO in a circular dated February 20, 2023, issued instructions to all zonal and regional offices that in compliance with judgment, the following employees with their employers may submit a joint option under para 11 (3) and 11 (4) of the scheme: employees and employers who had contributed on a salary exceeding the prevalent wage ceiling of Rs 5,000 or Rs 6,500 and did not exercise the option under the proviso to Para 11(3). These employees were members of EPS 95 before September 1, 2014, and continued to be so on or after September 1, 2014.

The writer is founder of RSM India