The court has given members of the Employees’ Provident Fund Organisation who have taken advantage of the EPS another chance to choose a higher annuity over the next four months.
The Supreme Court upheld the Employees’ Pension (Amendment) Scheme (EPS), 2014 as “legal and valid” on Friday, while reading down certain provisions.
The court gave members of the Employees’ Provident Fund Organisation (EPFO) who had taken advantage of the EPS another chance to choose a higher annuity over the next four months. Existing EPS members can contribute up to 8.33 percent of their ‘actual’ salaries as opposed to 8.33 percent of their pensionable salary, which is capped at Rs 15,000 per month pension as of September 1, 2014.
However, the court struck down certain provisions pertaining to the scheme’s current subscribers.
The requirement to contribute an additional 1.16 percent of salary if it exceeds Rs 15,000 per month was ruled to be in violation of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The court halted the implementation of this provision for six months.
“Because the (1952) Act does not contemplate any contribution to be made by an employee in order to remain in the scheme, the Central Government cannot mandate such a stipulation under the scheme itself,” the Supreme Court stated. Even if the government had wanted to, it could only have done so through a legislative amendment, according to the report.
This would imply a larger annuity after retirement. According to an Indian Express report, experts believe that in times of higher inflation and actual salaries far exceeding the pensionable salary cap of Rs 15,000, this would provide better social security coverage for workers after retirement.
A three-judge bench comprising Chief Justice of India UU Lalit and Justices Aniruddha Bose and Sudhanshu Dhulia ruled that the scheme’s amendments would apply to employees of exempted establishments in the same way that they do to employees of regular establishments. There are approximately 1,300 companies on the EPFO’s list of exempted establishments.
This means that EPFO members who have taken advantage of the EPS will have another four months to opt-in and contribute up to 8.33 percent of their actual salaries – as opposed to 8.33 percent of their pensionable salary, which is capped at Rs 15,000 per month – to pension. The court extended the deadline by exercising its authority under Article 142 of the Constitution.
Changes Made Over Time
An amendment to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, enacted in 1995, established a scheme in which the pension fund would consist of a deposit of 8.33 percent of the employers’ contribution to the provident fund corpus. The maximum pensionable salary at the time was Rs 5,000 per month, which was later increased to Rs 6,500.
An EPS amendment in 2014 raised the pensionable salary cap from Rs 6.500 to Rs 15,000 per month and allowed members and their employers to contribute 8.33 percent of their actual salaries (if they exceeded the cap) to the EPS.
It gave all EPS members six months, beginning September 1, 2014, to choose the amended scheme. This could be extended for an additional six months at the discretion of the Regional Provident Fund Commissioner.
However, the amendment required such members to contribute an additional 1.16 percent of their monthly salary above Rs 15,000 to the pension fund. The Supreme Court ruled that this was unconstitutional.
Previous HC decisions
Several high courts had previously ruled on the matter. The Kerala High Court struck down the EPS (Amendment) Scheme, 2014 in 2018, and the Delhi High Court agreed with the Kerala High Court in 2019 when it quashed a circular issued by the provident fund authorities on May 31, 2017, barring exempted establishments from the benefits of higher pension. The Rajasthan High Court expressed the same opinion in 2019.