Higher Pension, higher tension for employers to pay a 1.16 percent additional EPS contribution
The Ministry of Labour and Employment has completed all necessary procedures within the timeframes specified by the Hon'ble Supreme Court in the stated order dated 4.11.2022.
Higher Pension, higher tension for employers to pay a 1.16 percent additional EPS contribution
Ministry of labour and Employment (MoLE) issued a notification on 3.5.2023 to comply with the Supreme Court’s judgement dated 4.11.2022 to harmonize with Section 142 of the Social Security Code 2020. This increased the employer EPS contribution to 9.49 percent for employees who chose a pension on a higher wage.
While upholding the validity of the amendments made to the Employees’ Pension Scheme, 1995 (EPS,1995) vide G.S.R 609 (E) dated 22.08.2014 (effective from 01.09.2014), the Hon’ble Supreme Court, in its judgement dated 04.11.2022 in Civil Appeal No. 8143-8144 of 2022 titled the Employees Provident Fund Organisation & Anr. Etc. Vs. Sunil Kumar B. and Ors.
The Ministry of Labour and Employment has completed all necessary procedures within the timeframes specified by the Hon’ble Supreme Court in the stated order.
The first direction of the Hon’ble Supreme Court in the said judgement was to provide opportunity to pensioners who retired prior to 1.9.2014 after exercising joint options under paragraph 11(3) of the EPS,1995, but the joint options were rejected by the Employees’ Provident Fund Organisation (EPFO) (due to the cut-off date).
This was supposed to be completed in eight weeks. In accordance with this directive, the EPFO published a circular on December 29, 2022, directing the above pensioners to submit online applications for the validation of joint options. The deadline for application submission was March 3, 2023.
However, the deadline was extended until May 3, 2023, and then again until June 26, 2023.
Furthermore, the Hon’ble Supreme Court held that all members who were in service prior to 01.09.2014 and continued to be in service on or after 01.09.2014 and who did not exercise the joint option due to a misunderstanding of the cut-off date, but were entitled to do so, should be given another chance to exercise their option, and the time for giving options should be extended by four months.
To comply with these instructions, EPFO issued instructions on 20.02.2023 for the above employees/pensioners to file online joint options. Joint options were due on or before May 3, 2023. However, the deadline has been pushed back to June 26, 2023.
Furthermore, the Hon’ble Supreme Court ruled that the requirement for members to contribute 1.16% of their salary as an additional contribution under the amended scheme was in violation of the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act). The Hon’ble Court directed the authorities to make the necessary changes to the Scheme within six months.
All aspects of the matter, including legal and administrative aspects, were thoroughly examined in order to carry out the above directive. It was decided that because the Code on Social Security, 2020 (the Code) has already been notified, it would be appropriate to implement relevant sections of the Code. Section 142 of the Code was previously operationalized as a single provision.
The Code also calls for the repeal of the EPF and MP Acts. As a result, certain provisions of the EPF and MP Act are abolished, while the corresponding provisions of the Code remain in effect. The spirit of the EPF & MP Act, as well as the Code, do not contemplate employee contributions to the pension fund.
As a result, in accordance with the notification and spirit of the EPF & MP Act and the Code, it has been determined to add 1.16 percent additional contribution into the EPS of the employers’ overall 12% contribution to the provident fund.
This clause is retroactive, in accordance with the orders of the Supreme Court. As a result, the Ministry of Labour and Employment published two notifications today, on 3 May 2023, implementing the foregoing.
With the issuance of the above notifications, the Hon’ble Supreme Court’s directions contained in its judgement dated 04.11.2022 have been followed.
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