Vipul R Desai, Legal Advisor & Consultant
MGLI :Emploee’s Pension Scheme, 1995 under EPF & MP Act,1952
Date : 19.10.2024 Time 12.15 to 1.30
Employees’ Pension Scheme, 1995 :
9727792535
Sr. Section/ Title Provisions
No. Para
1 1(1) Short title & This scheme is called EPS 1995
&(3) commencement Commenced from 01.04.1972 for the benefit of
of EPS Scheme the members of EPF.
1971
2. Purpose 1. Super annuation pension, retirement
pension, permanent total disablement to
employees covered under EPF Act 1952.
Besides widow or widowers pensions,
children pension or Orphan pension,
payable to the beneficiaries of such
employees. [ section 6A(1)]
3 1(3) Scope Establishment belonging to the class of
[Establishments industries which have been listed in the
covered] scheduled appended to EPF and MP Act, 1952. [
All establishments & Factories ]
Section 16 of the EPF Act : EPF Act & the EPS is
not applicable to :
- Cooperatives Societies
- Central/State Govt Employees having
similar scheme
- Central/State Govt establishments having
similar scheme under separate statute.
- Discretionary power of Central Govt. to
exempt any establishment in view of
financial position or other reasons by
notification in official Gazette.
Vipul R Desai, Legal Advisor & Consultant
4 1(3)(4) Membership of - As on 16.11.1995
3& the Scheme - A member of cease family pension scheme
para 6 1971 before commencement of this
scheme.
- A member of cease family pension scheme
1971 or died between 1-4-1993 and 15-
11-1995 and has exercised option under
para 7 to join the scheme.
- Member of the EPF fund of exempted
establishments. On 15.11.1995 but not a
member of a ceased family pension
scheme 1971 exercised option under para
7.
5 Option for - Members as under para 6[c] who have
joining the died between 1-4-93 and 15-11-1995
scheme deemed to have exercised option to join
scheme on the date of death.
- Members under para 6[c] and alive have
option to join scheme as per para 17 from
the date of exit from employment.
5 Family Wife / husband and minor sons and unmarried
daughters of a member of the family pension
fund. ( adopted sons and daughters are also
included. )
6 Contribution Out of PF contribution 8.33 % to be diverted to
Pension Scheme within 15 days of the close of
month. Central Government to contribute
1.16% of member’s pay.
7 Para 11 Determination From membershipaveragemonthly pay drawn
of pensionable during contributory period in the span of 60
salary months preceding the date of exit subject to
maximum of Rs.6500/- pm till 31st August, 2014
and from 1.9.2014 Rs.15000 pm. :
Formula :Last 60 months average basic + DA +
Retention allowances * pensionable service / 70
[Notification dated 1.9.2014]
Para-4 Existing members [Emploees] & Employer as on
1.9.2014 could opt for higher contribution in
Vipul R Desai, Legal Advisor & Consultant
excess of Rs.15000/- pmby exercising option
subject to payment of 1.16% on higher
contribution. [Issue decided by Supreme Court
that Employer has to bear this burden.]
8 Merger of On commencement of employees’ pension
Schemes scheme (EPS) old family pension scheme
merged with the new scheme. [ With effect from
14.9.95]
9 Past service Years of Past Salary upto Salary more
benefit service 2500 PM than 2500 PM
Upto 11 years 80 85
Upto 11-15 95 105
Years
Upto 15 to 20 120 135
Beyond 20 150 170
Subject to the minimum of Rs.800 per month
for 24 years of Past service.
10 How pension is Pensionable salary average salary of last 60
worked out Months * pensionable service /70
Actual service: The aggregate of the period of
service during which the pension contribution is
paid after 16.11.1995.
Superannuation Pension: After completion of 20
years’ service and attaining age of 58 years.
Retirement pension: 20 years Eligible service or
otherwise ceases to be in employment before
attaining the age of 58 years.
Short Service Pension: if the member has render
eligible service of 10 years or more but less than
20 years
For a new entrant member: superannuation of
retirement pension is computed as under;
Pensionable salary x pensionable service/ 70
The amount of short service shall be calculated
as if the member has rendered 20 years eligible
service. The amount so arrived at shall be
reduced at the rate 6% for every year by which,
the actual eligible service falls short of 20 years,
subject to the maximum of 25% reduction.
Vipul R Desai, Legal Advisor & Consultant
Para- Monthly Member is entitled to :
12[1] Member’s [a] Superannuation : 10 years’ service
Pension [b] Early Pension : 10 years’ or more service
but left employment before attaining 58 years of
age
11 Para - Commutation Commutation of 3 years from commencement of
12A the scheme maximum upto 1/3 office pension.
So as to receive 100 times monthly pension (
Para 12A of the scheme)
12. UAN Universal account number is 12 digit number
allotted to each subscriber by linking with the
members currently active PF account number.
(from 31.07.2014 to 30.11.2016) from
December, 2016 new member has to be allotted
UAN linked to establishment code number.
13 Delayed Member has option to delay, pension beyond 58
pension facility. years. Till he attains 60 years, but contribution
stops at 58 years. In case of delayed pension 4%
increase in pension per annum is allowed.
The member can delay the pension upto 60
years and continue contribution up to 60 years.
Eligiblity to claim higher pension based on SC Judgement :
The EPFO Vs Sunil kumar04.11.2022: Eligibility criteria as pr the SC
judgment are as under:
Status of Employee Eligibility to claim Steps for higher pension
higher pernsion
Employees in service as on Yes By filing a higher
01.09.2014 and have pension claim on or
exercise joint option and before the last date
rejected by EPFO but are along with:
contributing on wages 1. proof of joint option
Vipul R Desai, Legal Advisor & Consultant
above the cape of INR under EPS
5000/ INR 6500
2. Proof of
remittance of EPS
contribution in the
PF account
exceeding the
wage limit of
INR6500 or INR
5000
3. Written refusal of
Assistant PF
Commissioner.
Employees in service as on Yes By exercising the joint
01.09.2014 and not option on or before the
exercise but are last date.
contributing on wages 1. Proof of
above the cape of INR remittance of EPS
5000/ INR 6500 contribution in the
PF account
exceeding the
wage limit of
INR6500 or INR
5000.
2. Proof of joint
optioned filed
under EPS.
Employees retired before Yes By filing a joint option
01.09.2014 but, have and higher pension
exercised joint option and claim application with
same has been rejected by documents as suugested
the EPFO. above.
Employees retired before No Not applicable.
01.09.2014 but not
exercised joint option
Employees in service as on No Not Applicable
01.09.2014 has exercised
earlier option but not
Vipul R Desai, Legal Advisor & Consultant
exercised new joint option.
Pursuant to the 2014
amendment
Supreme Court judgment in EPFO Vs. Sunil kumar B dated 4.11.22 :
Issues Before Supreme Court :
EPFO notification amending the scheme from 1.9.2014 : [ Notification
dated 22.8.2014]
1. Members joining on or after 1.9.2014 drawing wages exceeding
Rs.15000/- per month shall not be eligible to voluntary contribute
to the Pension Scheme. Accordingly, the maximum pensionable
salary for the purpose of determining pension has been revised to
Rs.15000/- PM.
2. Besides, the pensionable salary shall be calculated on the average
monthly pay for the contribution period of the last 60 months [
instead of 12 months earlier] preceding the date of exit from the
membership.
3. Monthly pension for existing or future member shall not be less
than Rs 1000/- PM from financial year 2014-15
Judgments of three high courts :
1. P Sasikumar& other Vs. Union of India Writ Petition No. 13120 of
2015 division bench of Keral High Court set a side the Employees
Pension amendment [ Scheme], conceived in GSR 609 E, 2014 vide
judgment dated 12.10.2018
2. Sunil kumar Vs Union of India WP No. 602 of 2015 decided on
12.10.2018, declared the EPF amendment scheme
unconstitutional.
Vipul R Desai, Legal Advisor & Consultant
3. BhartiyaKhadya Nigam KarmachariSangh& another Vs. Union of
India Writ Petition 5678 of 2018 the Delhi high court expressed the
same view as above and quashed the circular of EPFO dated
31.5.2017 precluding exempted establishments employees from
the benefits of higher pension.
4. Union of India Vs Jale Singh in special Appeal Writ No. 436 of 2019
the Rajasthan high court vide judgment dated 28.8.2019 also
expressed the same view as above.
Special Leave Petition before the Supreme Court by EPFO :
(3) The maximum pensionable salary shall be
limited to fifteen thousand rupees per month.
(4) The existing members as on the 1st day of
September, 2014, who at the option of the
employer and employee, had been contributing on
salary exceeding six thousand and five hundred
rupees per month, may on a fresh option to be
exercised jointly by the employer and employee
continue
to contribute on salary exceeding fifteen
thousand rupees per month and the
pensionable salary for the existing members
who prefer such fresh option shall be based on
the higher salary :
Provided that the aforesaid
members have to contribute at the
rate of 1.16 per cent. on salary
exceeding fifteen thousand rupees
as an additional contribution from
and out of the contributions
payable by the employees for each
month under the provisions of the
Act or the rules made
there under :
Provided further that the fresh
option shall be exercised by the
member within a period of six
months from the 1st day of
September, 2014:
Vipul R Desai, Legal Advisor & Consultant
Supreme Court Judgment ratio :
The apex court has decided to implement as
under :
1. The high court had erred
in taking into
consideration macro level
social disparities while
exercising its judicial
powers while quashing
the impugned notification
of EPFO.
2. The Supreme court has
struck down the
requirement of the
scheme that employees
should contribute
@1.16% of the wages as
no provision to that effect
is made in EPF Act, 1952.
The apex court has further
held that appropriate
legislative provisions
would be necessary for
the same. The apex court
gave 6 months time limit
for this. In this regard
EPFO has alreafy issued
circular dated 4.5.2023
directing the employer to
pay additional 1.16%
meaning thereby the
employer will have to pay
8.33 plus 1.16 aggregating
to 9.46% of the wages.
3. The apex court has upheld
the computation system
as per the EPFO
notification meaning
thereby the pension
would be calculated on the
basis of last 60 months
Vipul R Desai, Legal Advisor & Consultant
basic plus DA instead of
12 months earlier. This
will reduce the amount of
pension considerably.
4. The apex court by using
power vested to it under
Article 142 of the
Constitution of India
directed that the
employees of exempted
and unexempmted
establishments shall be
treated at par for the
benefit of the higher
pension. Article 142 of the
Constitution of India
provides plenary powers
to the apex court to give
such direction to do
complete justice in such
cases.
5. The most important
direction given by the
apex court is that, if the
employer and employee
decides to opt jointly for
coverage in the scheme
beyond Rs. 15000/- PM,
they would not
automatically excluded
from right to exercise
option under para 11[4] of
the scheme post
amendment, irrespective
of the fact that, they did
not opt for it under para
11[3] of the scheme
earlier.
6. The apex court has further
ruled that the employees
retired prior to 1.9.2014
without exercising option
under para 11[3] will not
be entitled to the benefit
of this judgment.
Vipul R Desai, Legal Advisor & Consultant
EPFO guidelines for higher pension:
1. The joint option/higher pension claim application should contain a
disclaimer or declaration
2. An employee should give explicit consent in the joint option/application
form for a share adjustment from EPF to EPS and a re- deposit of the
amount.
3. An employee should give an undertaking of the trustee for a share
transfer of funds from exempted PF Trust to the EPFO pension fund.
The undertaking will be effective for the deposit of due contribution and
interest up to the payment date within the specified time.
4. The EPFO will issue further circulars regarding the deposit method and
pension computation.
5. An employee can complaint on EPFiGMS portal when they face a
grievance to get a higher pension after submitting the application and
payment of the due contribution, if any
6. Online facility for submitting applications for validation of joint options
to the employees who retired prior to the 1.9.2014 and had exercised
joint options before retirement had been provided on the EPFO website
till March 3, 2023, which now stands extended to 26.6.2023.
7. For eligible employees, who now opt for higher pension based on actual
pay, the pensionable salary is not capped at INR 15000/- per month.
This will result in a higher government guaranteed pension after
retirement. However, once an eligible employee opts for higher pension,
his EPF balances accumulated so far with interest will be permanently
transferred to the EPS and thus, the EPF lump sum payout will reduce.
8. As per the latest circular of EPFO dated 2.6.23 those employees
[Members] entiled to get higher pension retired prior to 1.9.2014 would
get pension on the basis of last 12 months average pay whereas those
Vipul R Desai, Legal Advisor & Consultant
retired post 1.9.2014 would get pension on the basis of last 60 months
average pay. This is in line with the amendment carried out in EPS in
2014 WEF 1.9.14. This has been upheld by the apex court also.
Example:
Mr. X became a member of the scheme in 1998
He has not exercised the joint option.
His salary increased to Rs.50,000 in 2015.
His employer contributes Rs.6,000 (i.e. 12% of
his basic wage) towards EPF.
Of the employer’s contribution, Rs.1,250 (i.e.
8.33% of Rs.15,000; the statutory wage cap)
willgo to the EPS.
The remaining Rs.4,750 (i.e. Rs.6,000 - Rs.1,250)
will go to the EPF.
He exercises the joint option within
26/06/2023 as per the Supreme Court
judgment sincethe EPS contribution is
above the statutory wage cap of Rs.6,500.
˭˭
After submitting the joint option, his
Employer will contribute Rs.4,165 (i.e. 8.33%
ofRs.50,000; his actual salary) and Rs.1,835
(Rs.6,000 - Rs.4,165) towards EPF.
Vipul R Desai, Legal Advisor & Consultant
The EPFO will calculate the monthly EPS
amount of 8.33% of the actual salary and
transferthe deference amount from the EPF
to the EPS.
In this case actual salary is Rs.50,000; and
pensionable service is presumed at 20 years the
pension would be as under :
Rs. 50000 x 20 years devided by 70 equal to Rs.
14285/- PM
