The Supreme Court on November 4 upheld the amended EPFO Employees’ Pension Scheme (EPS), which caps the basic salary of an employee at Rs.15,000 a month for the pension component derived from it to be calculated.
Key points
- A Bench led by the Chief Justice of India has allowed the appeals of the Employees’ Provident Fund Organisation and the Union government challenging the judgments of the High Courts of Kerala, Rajasthan, and Delhi, which had quashed the EPS Amendment of 2014.
- The court has given four months to employees who could not enroll in the scheme and are entitled to do so.
- Employees of various establishments are covered by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (the Act), which provides for a provident fund account in the name of each employee of a covered establishment.
- In this account, the employee contributes 12 per cent of her/his basic salary and the employer contributes an equal amount.
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 originally did not provide for any pension scheme.
- Section 6A was inserted into the Act, authorising the creation of a scheme to provide pension to employees. Thus, the Employees’ Pension Scheme, 1995, was born.
- The EPS, which aims to provide employees with pension after the age of 58.
- According to the scheme, the maximum salary on the basis of which pension was to be calculated was Rs. 6,500 per month. An amount of 8.33 per cent from the employer’s contribution (12 per cent) would go to the employee’s pension fund.
- Later, on March 16, 1996, a proviso was added to the EPS, granting the option to the employer and the employee to contribute more to the pension fund —at 8.33 per cent of the basic salary of the employee.
- The EPS was amended with effect from September 1, 2014, which limited the maximum pensionable salary at Rs,15,000 per month. The EPS was amended to give an option to the existing members as on September 1, 2014, to submit a fresh application, jointly with their employers, to contribute on salaries exceeding Rs.15,000 per month.
- However, in this case, the employee would have to make a further contribution at the rate of 1.16 per cent on the salary exceeding Rs.15,000. Also, such a fresh option would have to be exercised within six months of the date of the amendment.
- The Supreme Court held that the amendment which required members to contribute an additional 1.16 per cent of their salary exceeding Rs 15,000 a month as ultra vires of the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
