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in/magazine/deep-
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pension-subscribers-are-kept-waiting-429968-2024-05-17
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As EPFO struggles with staff shortage, higher

pension subscribers are kept waiting

Almost 18 months after the Supreme Court ruling, subscribers who opted
for a higher pension under the Employees' Pension Scheme continue to
wait as the EPFO, facing a staff crunch, tries to figure out the math

Surabhi

• Print Edition: May 26, 2024

Almost 18 months after the Supreme Court ruling, subscribers who opted for a higher
pension under the Employees' Pension Scheme continue to wait as the EPFO, facing a
staff crunch, tries to figure out the math
Over 17 months and counting. That’s how long members of the
Employees’ Pension Scheme (EPS) have been waiting to see the
implementation of the November 2022 Supreme Court ruling on
higher pension. While they still have hope, there is little clarity on
when the apex court’s ruling will be implemented by the Employees’
Provident Fund Organisation (EPFO), which has been processing
hundreds of thousands of application forms.

In all, the EPFO had received 1.75 million applications for higher
pension. This includes about 410,000 applications from pensioners
who had retired before September 1, 2014, and another 1.34 million
from members under the joint option (where their salaries
exceeded the cap of Rs 15,000). By December 2023, about 1.17 million
applications were still at various stages of validation by employers
and it is unclear how long it will take to process these. EPFO, the
retirement fund manager, had also sent out more than 42,000
demand notices for additional payment by members opting for
higher pension to deposit funds to meet payments for past dues.
“The first leg of the process—submitting applications—is now over.
The EPFO is understood to be processing these applications.
Members whose applications are found in order in all respects
should hear about the amount to be transferred from the EPF
account to the EPS sometime soon, if [they have] not heard so far,”
says Kuldip Kumar, Partner with tax consulting firm Mainstay Tax
Advisors.

But on the ground, there has been little progress, leaving many
pensioners and subscribers—as well as employers—with an
uncertain future. “The delay in implementation with regard to the
post September 1, 2014, cases has been very long and many
pensioners are suffering because of this. Some have passed away
in the interim without getting the benefit,” says pension activist
Parveen Kohli. He claims that the method of calculation of higher
pension for these retirees has led to the quantum of pension being
reduced substantially and many petitions have been filed in the
high courts over this.
Kumar notes there may be old records involved, and it needs to be
seen how these applications would be disposed of for
discrepancies. “There might even be cases where employers could
not validate and verify the old records in the absence of details,” he
says, adding that he has seen cases where employees changed
jobs and their accumulated PF was not transferred to their new
account, or where employees lack complete details; now those
employers have shut their businesses or have been taken over by
other firms. “EPFO should provide some help to such employees or
even consider alternative methods of verification,” he says.

Several companies and employers’ associations have also been in

touch with the EPFO to clarify the processes and ascertain when the
higher pension will be implemented, and the retirement fund
manager has also been working with them to explain the
procedures.

What was the genesis of the issue? For that, one needs to go back
in time.

EPS, launched in 1995, is under the EPFO that runs the provident fund
scheme for the formal sector. In establishments that have 20
employees or more, both the employer and the employee are
mandated to pay 12% of the basic salary capped at Rs 15,000 per
month to the EPF. Of the 12% of the employer’s share, 8.33% is
diverted to fund the EPS. The centre also contributes 1.16% of the
monthly wage. A member of the EPS qualifies for pension after 10
years of service or on attaining the age of 58 or 60 years. The
pension to be paid is based on a formula of the period of service
and the pensionable salary. But a minimum monthly pension of Rs
1,000 is guaranteed to all eligible members. By the end of FY23, the
EPS had 7.56 million pensioners and it had disbursed Rs 21,796.85
crore, including pension and withdrawal benefits, that fiscal.

The scheme was amended in September 2014 with what experts

believe was an aim to expand the coverage and ensure higher
contributions, as it was running at a projected deficit. The
amendment changed the cap on monthly salary to Rs 15,000 from
the earlier Rs 6,500, and allowed members along with their
employers to contribute 8.33% of their actual salary (if it exceeded
the cap) towards EPS. It gave all EPS members, as on September 1,
2014, six months to opt for the amended scheme. Employees, who
opted for the amended scheme, were also required to contribute
1.16% of the monthly salary exceeding Rs 15,000 towards the pension
fund.

The amendments were contested across states by members as

there were many who could not opt for the new benefits. The
Supreme Court in 2022 upheld the 2014 amendments, enabling
subscribers to opt for higher pension, but struck down the member
contribution of 1.16%. The apex court also gave four more months to
eligible subscribers to opt for higher pension.

Since then, much water has passed under the bridge. The EPFO has
issued a number of detailed circulars advising subscribers on how
to apply for the higher pension and even extended deadlines
several times to help them procure the required documentation. It
has also released nine FAQs to guide subscribers on the process, a
pension calculator for them to assess the higher monthly pension
they can get, held over 3,000 meetings and has initiated the process
of validating the applications it has received. An actuarial exercise
is also on to assess the impact of higher pension on the EPS, which
has been running at a projected deficit for years. But given the huge
numbers at stake, it has not been a simple exercise.

“The EPFO is trying to fast-track the implementation of the Supreme

Court ruling but it can make or break the EPS corpus. We are holding
multiple generations of PF members’ money and all—current and
future members—are stakeholders. We need to protect the EPS to
protect all their interests,” says Sougata Roy Choudhury, Executive
Director of CII and a member of the EPFO’s Central Board of Trustees
(CBT).

A big concern is the projected deficit in the EPS and the impact of
the higher pension payout. According to the actuarial valuation for
FY18 and FY19, the EPS had a deficit of Rs 37,326.94 crore, up from a
deficit of Rs 15,531.91 crore in the combined actuarial valuation for
FY16 and FY17, respectively. While the EPS has not had any cash flow
problems till date because it has had more receipts than outgo
since inception, there is a projected deficit due to declining
contributions by members, and the increasing number of
pensioners under the scheme.

CBT, the apex decision-making body of the EPFO that is chaired by

the Union Labour & Employment Minister Bhupender Yadav, has
been regularly reviewing the implementation of the ruling.
In a status report, the EPFO had underlined that it has been its
“constant endeavour” to process the applications expeditiously,
while ensuring consistency and accuracy, and providing ample
opportunity to members and pensioners. It also highlighted that
there were various dimensions to this task, including the fact that
many employees, pensioners and employers have sought
additional time to furnish requisite details and clarifications.

To assess the impact of higher pension on EPS, an actuary has been

appointed specifically for the purpose of evaluating the impact, it
had said, adding that this can be done once all applications have
been processed. Interim actuarial evaluations will continue for
every 50,000 demand letters issued. Further, as much as 52% of the
higher wage cases pertain to exempted establishments or privately
managed PF trusts, which pay only a nominal fee to the EPFO, and it
had called for increasing the charges.

It had also highlighted the huge burden on its workforce noting that
a large proportion of applicants permitted to opt for higher pension
are in service and the EPFO’s work on this will have to continue.
“Therefore, there is need for separate staff for pension work in the
head office as well as those in the field,” it had said, adding there
was a need to set up an in-house actuarial team.

The EPFO did not respond to an emailed questionnaire

from Business Today on the issues.
Harbhajan Singh Sidhu, General Secretary of trade union Hind
Mazdoor Sabha and a member of the CBT, notes that there is slow
progress in scrutinising the applications as the EPFO does not have
adequate infrastructure. “Officers are overburdened, and the
existing staff does not have the time to scrutinise so many
applications. A separate division is required for this,” he says, adding
that the EPFO had about 9,000 vacancies, or about 40% of the
sanctioned positions, of which about 4,000 have been filled up
recently.

Meanwhile, there also continues to be a long-pending demand to

review the minimum monthly pension of Rs 1,000, which was fixed in
2014, with pensioners and trade unions calling for at least doubling
it. However, since the centre has to pay a subsidy for this pension, it
has not been in favour of such a move.

For now, it seems unlikely that these problems will be addressed at

one go and stakeholders note that any conclusive move will take
place only after the General Elections. But resolving the issue while
ensuring the stability of the scheme could go a long way in the
objective of providing social security to its workers.

@surabhi_prasad

Published on: May 17, 2024, 3:47 PM IST