EPF 1995 : Pension On Higher Wages at Unified Member Portal on or before 3rd may 2023
EPFO: PENSION ON HIGHER WAGES
You must be knowing that EPFO members are entitled to a pension. The pension is given to anyone after retirement only. The contribution made by the employers is fixed i.e. 12 % of their basic salary. There is again a bifurcation of the same. Of the 12%, only 3.67% goes to the EPF (Employees’ Provident Fund) and the rest 8.33% goes to the EPS (Employees’ Pension Scheme).
Some amendments were made in the year 2014. These amendments restricted the higher EPS contributions. Let us discuss in detail the pension system adopted for higher wages.
EPF HIGHER PENSION SCHEME
All the rules related to the EPF are mentioned in the EPF Act of, of 1995. Section 6A deals with this only. As already stated, 8.33 of the 12% basic salary of the employee is contributed towards the EPS. Th EPS–9595 restricted the monthly pension from Rs. 5000 to Rs. 6000.
Provision Para 11 (3) – This Para allowed the employee as well as the employer to contribute 8.33 % of their actual salary, which removes the restriction that capped the contribution to Rs. 5000 to Rs. 6500. But to get this, the employee has to fill a joint option form related to the Higher Pension Contribution
EPS – 2014 –The amendment made in the year 2014, omitted the provision mentioned ie Para 11 (3). Now, the maximum pensionable salary is increased to Rs. 15,000. So, now the employers need to contribute 8.33% (towards EPS) of Rs. 15,000, not depending on the amount/salary withdrawn by the employee. It removes the restrictions imposed on the pension received by the employees withdrawing higher salaries.
Note – Those employees who were part of EPS–1995 or joined before 2014, cattle a new joint option within six months.
In picture : Uan member portal : EPS Pension On Higher Wages important link as shown step 1 and step 2
RULES RELATED TO THE HIGHER PENSION CONTRIBUTION UNDER EPS
After the amendments made in the year 2014, there was some confusion and disappointment for those withdrawing higher salaries. They even filed a case in the High Court and Supreme Court. Supreme Court then raised the limit from 6 months to a fixed date i.e. 03/05/2023. This is a great relief from the court. Now, those who filed the joint declaration will get the Higher EPS contribution which will be calculated from the date of their joining.
Let me explain the process of EPS and EPF calculation in simple steps
1. E.g.., if one becomes a member of the EPF in the year 1998, and he forgot to file the joint option.
2. In 2015 (after the amendment of 2014), his salary was y raised to about Rs. 60,000.
3. The employer will then contribute Rs. 7,200 (which is 12% of the basic wage).
4. From the whole of the employer contribution, Rs. 1250 will go to the EPS. This is fixed for all. This is fixed according to a rule. The rule says that everyone will get EPS as 8.33% on Rs. 15000. Rs. 15,000 is considered as the basic salary for the Pension deduction.
5. The remaining amount, i.e. Rs. 5950 will go to the EPF.
6. As the person has submitted the joint option, so there is no cap on the EPS contribution. The EPFO will calculate the EPS amount of 8.33% of the actual salary. The difference amount will then be transferred to the EPS from the EPF.
Note – There is only one thing that one needs to remember, the EPF corpus gets reduced by higher pension contribution.
WHAT IS HIGHER PENSION ELIGIBILITY?
For claiming the higher pension, the following criteria must be matched
1. The employees retired before 01/09/2014.
2. Employees must exercise the joint option under para 11 (3) under EPS – 1995 scheme.
3. It is applicable on salaries exceeding the wage limit of Rs. 5,000 to Rs. 6,500.
4. EPFO discretion.
HOW TO APPLY FOR HIGHER PENSION IN EPF – Online?
As per the direction of the Regional Provident Fund commissioner (RPFC), an employee should apply and fill out the higher pension claim application. There is a dedicated site for this that provides the specific URL to do so.
For this, follow the steps discussed below :
1. Go to the official EPFO portal. Alternatively, UAN member Portal.
2. There will be many sections on this page. Search for the section ‘Important Links’.
3. You will find an option ‘Pension on Higher Salary: Exercise of Joint Option under Para 11 (3) and para 11 (4) of EPS – 1995 on or before 3rd May 2023.
4. You have to choose one option from the two available –
(a) Those, who have retired before 2014, have to click on the option ‘Validation of joint options who retired before 01.09.2014 and exercised joint option’.
(b) Those, who have retired after 2014, click on ‘Exercise of joint option for employees who were in service before 01.09.2014 and continued to be in service 01.09.2014 but could not exercise the joint option’.
5. Fill in the details asked and then Submit the form.
Important – Once submitted, you will get a receipt number for the digital registration of the application. This application will then be forwarded to the respective employer. This will then be verified by the employer through the digital signature.
The concerned dealing assistant will verify the details and pass them on to the section supervisor/account officer. It will then be forwarded to the APFC (Assistant Provident Fund Commissioners).
He will then thoroughly examine it and send the final decision to the Applicant. The applicant receives the information through various modes – SMS, Phone, email, and post.
CALCULATION FORMULA FOR THE CALCULATION OF THE EPF HIGHER CONTRIBUTION
There is a simple formula for the calculation of the Monthly Pension amount. The formula is as such –
Monthly pension amount = (Pensionable Salary*pensionable service)/70
Here, are some terms that need clarification –
(a) Pensionable Service – It means the number of years for which the contribution was made.
(b) Pensionable Salary – It means the average of the last 60 months’ salary.
Let me explain this formula by giving you an example. This formula works only if someone has exercised the joint option for a higher option.
1. If the monthly salary of a person for the last five years is about Rs.60,000.
2. The total number of years for which he was in service is 25 years.
3. At around 58 years, he superannuated.
4. With all the figures ready, let us apply this formula.
60,000* (25+2)/70 = Rs. 22,800
So, the monthly pension payment will be Rs. 22,800.
Note – We have added two more years to 25 years because if superannuation is done at the age of 58 years, 2 years are added to the service period (by default)
GENERAL GUIDELINES FOR HIGHER PENSION
Here, I am again revisiting the rule for the higher pension. The rules are –
1. A declaration or disclaimer is needed for a joint higher pension claim.
2. A consent by the employee for PF share adjustment to EPF.
3. The non-exempted establishments should share full details of the share refund with the interest amount.
4. All the documents like – proof of joint operation (para 26(6)), para 11(3)), proof of remittance of EPS contribution, APFC written refusal, etc.
5. Check the current circulars of EPFO.
6. Employee should furnish the undertaking of the trustee.
7. In case of any complaint or grievance, raise a complaint in EPFiGMS.