Decoding EPFO's latest guidelines: You can now get higher pension, ask for 8.33% deduction

Employees' Provident Fund Organisation (EPFO), the government retirement fund body, has now enabled subscribers to go beyond the pensionable salary cap of Rs 15,000 per month, on which employers deduct a sum equal to 8.33 percent of the 'actual basic salary' towards pension under the Employee Pension Scheme (EPS).

The Supreme Court set a four-month deadline for eligible subscribers to choose higher pensions under the EPS, and the EPFO released new guidelines two weeks before that deadline expired.

According to the Supreme Court decision, the deadline for applying for a higher pension under EPS was March 3, 2023.

The EPFO has introduced a new option for subscribers who were previously unable to choose higher pensions. Employees will have the option under the new option to have their employers deduct a sum equal to 8.33 percent of their actual basic salary for the EPS pension.

The EPS amendment of August 2014 raised the pensionable salary cap from Rs 6,500 to Rs 15,000 per month. The same amendment permitted members and their employers to contribute 8.33% of their actual salaries to EPS if they exceeded the cap.

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But there's a catch

While the Centre increased the pensionable salary cap under EPS from Rs 6500 to Rs 15,000 in 2014, employers and members were still required to contribute 8.33% of their actual salaries to the scheme if they exceeded the cap. 

The EPFO gave all EPS members a six-month window to choose the modified scheme for a higher pension. Several subscribers, however, missed this opportunity. As a result, a new window has been created based on a Supreme Court decision in November 2022.

How to opt for higher pension?

An employee and an employer can now sign up together, requesting that the EPFO deduct 8.33 percent of the higher monthly basic salary (up to Rs 15,000) in order to ensure a larger accumulation towards pension. It should be noted that this will necessitate the reallocation of corpus from the Employees' Provident Fund to the Employees' Pension Scheme from the date of joining membership in these schemes.

According to the most recent circular, an online facility will be provided for employees who continued to be EPS subscribers on or before September 1, 2014, with details to be provided shortly.

According to the circular, “once received, the Regional PF Commissioner shall put up adequate notice on the notice board and banners for wider public information."

Eligibility

Employees and employers who had made contributions on salaries above the Rs 5,000 or Rs 6,500 wage ceiling.

Employees and employers who were EPS members but did not use the joint option during the prior window.

Employees who were members prior to September 1, 2014 and remained members on or after that date.

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- PTC NEWS