As of today, an EPS member would have to agree to the above-mentioned deduction without knowing how much would be deducted from his/her EPF and what is the approximate return/ amount of higher pension that he/she would get in lieu of that or the calculation formula that EPFO would use. Further, there are various queries, relating to eligibility, that remain unanswered as there are no FAQs issued by the EPFO on this subject. For example, an EPS member who was actively contributing prior to 2014 but was unemployed for some years (did not withdraw from EPS but remained an inactive member of EPS) and then took up employment later and became an active contributing member again: Would such a member be eligible to apply?
The issue started in 2014 when EPFO amended the rules to make it difficult for EPF members to contribute a percentage of their actual wages to get higher EPS pension. Members approached courts at various levels and the matter finally reached the Supreme Court which finally passed an order in their favour. However, the process of applying for/getting a higher pension since then has not been pleasant for most members.
SC had given a 4-month window for EPFO to allow members to apply for higher pension. Just a few days before the original deadline (March 03, 2023) was to end, the EPFO came up with an online joint application form for those eligible members who were member prior to September 1, 2014 and continued to be in service on September 1, 2014, or after that. This form was made available on EPFO’s website on February 27, 2023. Obviously, given the inadequacy of time left for the online application, EPFO had to extend the deadline. Therefore, the EPFO extended the application window by another 2 months to May 3, 2023.
However, one of the important unclarified points in the higher pension application process for eligible members, who continued to be in service on or after September 01, 2014, is regarding the new EPS contribution methodology as the earlier methodology will have to be changed after the crucial SC order. The apex court asked EPFO to discontinue the practice of charging 1.16% additional amount on higher contribution above the prevailing wage ceiling of Rs 15,000, from the employees who applied for higher pension and it instructed EPFO to come up with a replacement mechanism. However, EPFO is yet to inform the public about this new method.
The new method or calculation will become a critical issue for eligible employees as any unexpected deduction from EPF balance or having to pay from their own pocket can severely impact their financial planning /funding of day-to-day expenses. Therefore, every member deserves a fair amount of time to go through the new methodology and analyse if they really want to go for higher pension application.
Even if EPFO releases the new methodology now, people will hardly have adequate time to understand and assess its consequences given the very short time left before the deadline of May 3. Moreover, it will not be of any use to people who have already applied for higher pension.Moreover, the advance consent does not leave any scope for members to withdraw from the higher pension application process if the calculations/payout required does not suit their financial needs. Regular assured income in retirement years is a matter of utmost importance for everyone. Asking members to blindly accept unknown computation of investment vs pension is hardly an accommodating approach by EPFO and fails to meet the spirit of the SC judgement.
To fill the online joint application form, the EPFO is insisting on the proof of permission taken from the PF commissioner that allowed employer and employee to contribute to the EPF account if the wage exceeded the notified ceiling limit. However, practically it was seen that EPFO never insisted on such permission to allow the employer to deposit money into the employee’s EPF account. The Kerala High Court in its interim order dated April 12, 2023, asked the EPFO not to insist on the documentary evidence. The EPFO is yet to come out publicly on how this interim order will be implemented by them.
Another thing to note is that the EPFO is asking the EPF members to provide a declaration empowering the central government to amend the EPS scheme from time to time. This declaration is important because when EPFO amended the EPF Act in 2014, it changed the pension calculation methodology which negatively impacted those who were active members or soon to retire. Hence, one does not know whether the future change will positively or negatively impact the EPF members on the basis of this declaration.
Therefore, it would be only just for all eligible members to expect the EPFO to issue the new computation methodology in the public domain and also simplify the online process so that applications may be accepted without proof of prior approval. After that, it should give a fair amount of time to members to analyse the impact of the changes. The least that EPF members deserve is a further extension of the deadline to enable them to take a well-informed decision on a critical financial issue.
EPFO should also give an exit window to people to review and withdraw their application after the publication of the new methodology especially those who have already applied earlier without knowing the new contribution methodology. This will allow them to review their application in light of the new computation methodology.