1. EPFO vide circular dated 20.02.2023 laid down the guidelines for the employees who were members of the EPS scheme as on 01.09.2014 and continued to be in service on or after September 1 2014 .
2. Earlier the Apex Court in its order dated November 4, 2022, had mandated the EPFO to provide four months to all eligible members to opt for higher pensions. The four-month period for opting for a higher pension was to end on March 3, 2023; the last date has now been extended to May 3, 2023.
3. The EPFO has enabled the URL of the unified members’ portal which states that subscribers seeking a higher pension can apply for it by May 3, 2023.
4. In this article, let us try to understand the most confusing clause to apply for a higher pension – Permission under Para 26(6) of the EPF scheme.
5. Background: The EPF Act was promulgated in the year 1952.Employees whose ‘pay’ was more than Rs 5000/- were considered excluded employees and not eligible to be a member of the EPF Scheme.
5.1 However, Section 26(6) of the Act allows them to enroll as a member of the EPF scheme by filing a joint declaration of employee and employer of the establishment, subject to approval by the Assistant Commissioner of PF.
5.2 Practically, the requirement under sec 26(6) was ignored by both the employers and employees. They started contributing PF on higher wages without complying with the provisions of Para 26(6). Even EPFO also accepted such a contribution of PF on higher wages.
5.3 When the EPS-95 scheme was introduced in 1995, employees drawing more than the ceiling limit were not excluded from the membership. Instead, it was provided that out of the employer’s share of the provident fund, 8.33% of the capped salary will be transferred to Pension Fund. The ceiling limit was Rs 5000 till May 2001, and Rs 6500/- till 31.08.2014.
5.4 The exclusion was introduced vide Para 3 of the G.S.R.609(E) amendment dated 22.08.2014 stating that EPF members drawing salary more than Rs 15000 were required to exercise a fresh option to continue contributing towards the pension scheme on their actual salary w.e.f. 01.09.2014
5.6 Until 01.09.2014, the proviso to Para 11(3) of the EPS 95 scheme has given an option to the employer and employee to contribute a percentage of the actual salary (i.e. not necessarily up to the ceiling limit of Rs 5,000), provided the employee and the employer has no objection.
5.7 There were certain restrictions as regards the time for exercising such an option and the matter ultimately went to Supreme Court. In the case of R.C. Gupta (supra), it was held that A beneficial scheme, ought not to be allowed to be defeated for any reason, particularly in a situation where the employer had deposited 12% of the actual salary and not 12% of the ceiling limit of Rs 5000/- or Rs 6500/- as the case may be, in provident Fund.
5.8 Afterward, the EPFO itself relaxed the requirement of a formal joint option, vide Para 2 of the circular dated 22.01.2019. The extract of the said circular is given below: –
6. Present Scenario: Now, in the online form to be submitted by the employee, it is mandatory to attach permission under Para 26(6) of EPF. The majority of the employees are not even aware of this provision.
7. What is the way out? The employer can provide the undertaking that the employee is contributing to EPF on actual salary as per the terms of Para 26(6) of the EPF 1952 scheme. An equal share is also contributed by the employer. The employee will scan and upload the form while submitting the application form for a higher pension.
8. This is also in line with the amended EPS Scheme 2014. Para 11(4) of the amended scheme stipulated that the EPF members drawing salary more than Rs 15000 were required to exercise a fresh option to continue contributing the pension amount on their actual salary. The Supreme Court vide judgment dated 04.11.2022 allowed 4 months (extended by EPFO till 03 May 2023) to exercise this option.
9. During an interactive session (virtual), organized jointly by the Employers’ Federation of India and Confederation of Indian Industries with the Central Provident Fund Commissioner and Regional Provident Fund Commissioner-Pension, Employees’ Provident Fund Organization, New Delhi, on 24.03.2023. the issue was discussed in detail. The clarification given by Smt. Aparajitha Jaggi, RPFC-Pension has been brought out in the following Paragraph:
9.1 The employee/employer should submit a Joint declaration complete in all respect. However, if a declaration under para 26(6) of the EPF Scheme is not available and is not attached to the Joint Declaration, a Joint declaration may be submitted without such declaration and as and when such declaration is traced, it should be submitted. The EPFO, Head office would decide whether declaration under para 26(6) is to be insisted or otherwise if warranted at a later stage.
9.2 Thus, it is advisable that the employees shall attach an undertaking/declaration duly verified by the employer.
10. The online submission of application by the employees is a first step towards higher pension under EPS 95 scheme. After that, the application will land in the employer’s login. The employer will verify the applications with a digital signature and then processing of the applications will be commenced by RPFC.
11. The lack of clarity among employees and the absence of clarification by the EPFO will result in further delay and that could defeat the purpose of the Court Order.
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