News Highlight
In a significant judgement, the Supreme Court has ruled that provisions of the Employees Pension Amendment Scheme 2014 are legal and valid.
Supreme Court’s Judgement
- The EPFO had appealed against the Kerala High Court’s judgement of quashing the Employees’ Pension (Amendment) Scheme, 2014.
- A three-judge bench of the Supreme Court agreed with the changes brought in by the amendment and said “we do not find any flaw in altering the basis of computation of pensionable salary”.
- The court uses its extraordinary powers under Article 142 to allow eligible employees who had not opted for enhanced EPFO pension coverage prior to the 2014 amendments to do so in 4 months
- The Court also invalidated a condition in the 2014 scheme as per which employees were required to make a further contribution at a 1.6% rate if the salary exceeded Rs 15,000.
- The court opined that the said condition is ultra vires but the court has kept this part of the instant judgement in suspension for six months so authorities can generate funds.
- The court said the amendments to the scheme shall apply to employees of exempted establishments as they do for the employees of regular establishments.
- There are about 1,300 companies in the list of the EPFO’s (Employees’ Provident Fund Organisation) exempted establishments.
Employees Pension Scheme
- EPF is a social security scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act,1952
- The scheme is managed under the aegis of Employees’ Provident Fund Organization (EPFO).
- EPF accounts are mandatory for employees earning up to ₹15,000 a month in firms with over 20 workers.
- Aim:
- To provide employees with pension after the age of 58.
- Both the employee and the employer contribute 12 per cent of the employee’s basic salary and dearness allowance to the EPF.
- The employee’s entire part goes to EPF, while the 12 per cent contribution made by the employer is split as 3.67 per cent contribution to EPF and 8.33 per cent contribution to EPS.
- Apart from this, the Government of India contributes 1.16 per cent as well for an employee’s pension. Employees do not contribute to the pension scheme.
What was the amendment in 2014?
- Amendment had raised the pensionable salary cap to Rs 15,000 a month from Rs 6,500 a month, and allowed members along with their employers to contribute 8.33 per cent on their actual salaries (if it exceeded the cap) towards the EPS.
- It gave all EPS members, as on September 1, 2014, six months to opt for the amended scheme.
- This was extendable by another six months at the discretion of the Regional Provident Fund Commissioner.
- The amendment, however, required such members (with actual salaries over Rs 15,000 a month) to contribute an additional 1.16 per cent of their salary exceeding Rs 15,000 a month towards the pension fund.
Employees’ Provident Fund Organisation
- Employees’ Provident Fund Organisation (EPFO) was established by an act of Parliament of India, to provide social security to workers working in India.
- It came into force by Employee Provident Fund and Miscellaneous Provision Act, 1952.
- EPFO comes under the control of the Ministry of Labour and Employment, Government of India.
- There are
- EPFO Scheme 1952
- Pension Scheme 1995 (EPS)
- Insurance Scheme 1976 (EDLI)
- EPFO is the largest social security organization in the world in terms of the number of covered beneficiaries and the largest in terms of the volume of financial transactions undertaken.
Content Source: The Hindu
Pic Courtesy: freepik