Tough call. Higher EPS pension: March 3 deadline triggers anxiety among eligible employees

With many eligible employees still confused about whether and how they would benefit from opting for a higher pension under the Employees’ Pension Scheme 1995 (EPS 95) post the Supreme Court ruling of November 4 last year, pressure is mounting on the government to extend the Supreme Court-specified window for availing of the benefit beyond March 3.

Read also: EPFO’s higher pension scheme: What’s in it for you?

Not only are eligible employees still weighing the pros and cons before they take a call, but even employers are grappling with this issue as joint applications have to be made to EPFO before the March 3 deadline for employees to gain the benefit of higher pensions, experts said.

Although the Employees’ Provident Fund Organisation (EPFO) put out a circular on Monday with instructions on how the Supreme Court’s decision of November 4 last year will be implemented at the ground level, the agony has been prolonged for eligible employees as this circular noted that the method of deposit and that of computation of pension will follow through subsequent circulars.

Lack of clarity

There is still a lack of clarity about the calculation regarding how much deposit one has to make for missed contributions in the past, several experts said. Many employees, in the absence of a pension calculator on the EPFO website, are unable to calculate the likely pension that they would get in case they want to opt for this and how much funds they would have to transfer from their PF corpus to the Pension Fund (employee consent is mandatory for the transfer).

The SC ruled last November that only those employees who were members of EPS 95 on or after September 1, 2014, are eligible for the higher pension. 

Also, only those employees who were contributing to the employees’ provident fund (EPF) in a higher proportion than the previous wage ceilings of ₹5,000 and ₹6,500 but could not opt for the higher contribution can now apply for the higher pension.

Those who want to avail the option of a higher pension will have to make a higher contribution towards EPS 95 from the employer’s share on the basis of their actual wages till the time they remain active members of EPF or retire.

For those opting for a higher pension, a higher contribution from now onward is not enough. They will also have to pay the additional contributions for the previous years. 

Fight against time

Aarti Raote, Partner, Deloitte India, said that employers had been awaiting clarification and guidance from the EPFO, which came as late as Monday. “With the deadline being March 3, the eligible employees are fighting against time to ensure the application is made in time. There are others who still have questions, and hence the employee asks for extension of the time period to avail of the benefit,” Raote added.

Puneet Gupta, Partner, People Advisory Services, EY-India, said, “Given that there are only 10 days before March 3, 2023, it will help employers and employees if there is an extension of the timeline to apply for a higher pension. This will be important so that employees can analyse the pros and cons of such a higher pension option for their specific case and make an informed decision that will significantly impact their retirement savings.

”This will also give time to employers to roll out employee communication and support employees in filing applications for a higher pension,” he added.

It may be recalled that the Supreme Court had, on November 4, last year, upheld the amendments made by the Labour Ministry in August 2014 to the EPS 1995. 

The amendment restricted the employees’ right to claim a higher pension, their entry into the EPS above a specified salary level, and the calculation of their pension at the time of retirement. 

However, the Apex Court had recognised that there had been uncertainty about higher pension in the past and had given time until March 3, 2023 for eligible members to make a joint application with their employer to the EPFO to avail higher pension benefit.

The SC held that there can be no cut-off date for an employer and an employee to avail the option of making higher pension contribution. In case such an option is exercised by the employee, the EPFO can divert the funds from the provident fund scheme to the pension scheme and provide a higher pension to the employees.

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