Higher Pension Demand

Higher Pension Demand

Context:

Recently, the Officers from Public Sector Undertakings (PSUs) have requested Prime Minister Narendra Modi to ensure that the Employees’ Provident Fund Organisation (EPFO) calculates pensions based on the Supreme Court’s November 2022 order instead of the pro-rata basis tied to contributions.

Key Highlights

  • The National Confederation of Officers’ Associations (NCOA), representing over two lakh officers and retirees across 255 Central Public Sector Enterprises (CPSEs), submitted a letter to Mr. Modi and other government officials, asserting that EPFO’s actions contradict the rightful pension enhancements for post-2014 retirees.
  • The officers urged the government to expedite the processing of joint applications and withdraw the pro-rata calculation. They also requested compensation for pensioners through interest on arrears caused by pension disbursement delays.
  • Retirees are advocating for a uniform calculation method based on the 60-month average salary before exiting service instead of bifurcating it into pre- and post-September 2014, as per the 2014 amendment criteria.

Supreme Court’s November 2022 Judgment

  • The Supreme Court upheld the Employees’ Pension (Amendment) Scheme, 2014, while extending the deadline for opting into the scheme by an additional four months.
  • Under Article 142, the ruling allows EPFO members using the EPS to contribute up to 8.33% of their actual salaries (rather than the 8.33% on the Rs 15,000 cap) towards pension, giving members another opportunity to maximise their pension contributions.
  • In the original scheme, the pensionable salary was calculated based on the average salary over the last 12 months before exiting the Pension Fund. The 2014 amendments revised this calculation to an average of the last 60 months.
  • The Court declared the requirement for members to contribute an extra 1.16% on salaries above Rs 15,000 as ultra vires, or beyond the scope of, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

New Guidelines Under the SC Ruling

  • Employees can now contribute 8.33% of their actual basic salary (including Basic Pay + DA) towards the EPS, creating a larger pension corpus and potentially resulting in a higher pension amount.
  • Currently, EPS contributions for pensionable salary are capped at Rs 15,000.
  • For those opting into this scheme, the employer’s contributions to the Employees’ Provident Fund (EPF) since September 2014 will be transferred to the EPS, along with any earned interest.

Eligibility Criteria

To avail of the benefits, employees must meet the following conditions:

  • They must have been members of EPS before September 1, 2014, and remained members on or after that date.
  • Both employees and employers should have contributed based on a salary exceeding the previous wage ceilings of Rs 5,000 or Rs 6,500.
  • They should not have exercised the joint option during the previous window while still being EPS members.