What does law say about the pension policy for employees?

In India there is an Act called as The Employees’ Pension Scheme, 1955 which is applicable to all factories and other establishments to which the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 applies. This Scheme is meant for members of the Provident Funds subscribing to Employees’ Provident Fund Scheme, 1952 or any scheme exempted thereunder. The pension policy is introduced as a social policy to the employees to survive their livelihood after the age of retirement. This is a social benefit by which the employees do not need to worry about their sustenance in their later stage of live.

What are the eligibility criteria for availing this facility of pension?

There are two forms of membership availability under the scheme:

• • Membership of the scheme under The Employees’ Pension Scheme, 1955 is compulsory for – All Provident Fund subscribers including those employed in Exempted Establishments contributing to the Employees’ Family Pension Scheme 1971, and – To all new entrants to the Provident Funds Scheme, 1952 from November 16, 1995 onwards, automatically become members of the Employees’ Pension Scheme.

• Membership under the scheme is also available on Optional basis – Existing members of exempted and un-exempted Provident Fund Scheme as on November 15, 1995 who are not members of the Family Pension Scheme, 1971. – Members of the Family Pension Scheme, 1971 who left employment between April 1, 1993 to November 15, 1995 whether they have withdraw their benefits of not. – Beneficiaries of Family Pension Scheme, 1971 who have died on or after April 1, 1993.

What are the benefits available to members under this Scheme?

The benefits that are provided to the members under the Employees’ Pension Scheme, 1995 are:

• Pension Payment for life on Retirement/Superannuation.
• Pension Payment for life on invalidation during employment.
• Lump sum amount payment to the member by way of commutation of Pension upto one third pension amount on optional basis.
• Capital return in option formula basis upon cessation of members pension payment.

What are the benefits available to family members upon death of the member?

The benefits that are provided to the family members upon the death of the member are as follows:

• • Payment of pension to spouse for life or until remarriage.
  • Payment of pension to children (two at a time) till they attain the age of 25 years additionally along with pension payment to spouse. For total and permanently.
  • Orphan Pension to children at higher rate upon cessation of Pension Payment to spouse.
  • To Nominee / Dependant parents for life in case member is unmarried or having no eligible family member.

What are the causes of death that are covered under the scheme for members for eligibility for payment of pension after death?

The scheme covers members death risk unconditionally – irrespective of whether such death occurs:

• While in service.
• Away from employment and not contributing to the fund, or
• After retirement as a pensioner.

Is there a provision facilitating benefits for seasonal or casual employees under the scheme?

 There are following provisions that are specified to facilitate the seasonal or casual employees:

• Employees engaged seasonally in any establishment, the period of “actual service” in any year, notwithstanding that such service is less than a year, shall be treated as full year.
• Pensionable salary will be worked out “Notionally” for full month in the event if drawal of salary for a part of the month.
• Pensionary benefits shall be extended to the members without co-relating compliance by the employer of the establishment

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The Ministry of Labour and Employment, Government of India has, with effect from 1 September 2014, brought into force several important amendments to the schemes framed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) i.e. (i) The Employees’ Provident Funds Scheme, 1952 (“PF Scheme”); (ii) The Employees’ Pension Scheme, 1995 (“Pension Scheme”); and (iii) The Employees’ Deposit-linked Insurance Scheme, 1976 (“Insurance Scheme”).

Key Amendments

PF Scheme

• • The definition of ‘excluded employee’ has been amended whereby the members drawing wages exceeding INR 15,000 per month are excluded from the provisions of the PF Scheme. Accordingly, the wage ceiling for an employee to be eligible for the PF Scheme has been increased from INR 6,500 per month to INR 15,000 per month.

Pension Scheme

• New members (joining on or after 1 September 2014) drawing wages exceeding INR 15,000 per month shall not be eligible to voluntarily contribute to the Pension Scheme.
• The maximum pensionable salary for the purpose of determining the monthly pension has been revised from INR 6,500 to INR 15,000 per month.
• The pensionable salary shall be calculated on the average monthly pay for the contribution period of the last 60 months (earlier 12 months) preceding the date of exit from the membership.
• The monthly pension for any existing or future member shall not be less than INR 1,000 for the financial year 2014-15.

Insurance Scheme

• The contribution payable under the Insurance Scheme shall now be calculated on a monthly pay of INR 15,000, instead of INR 6,500.
• In the event of death of a member (on or after 1 September 2014), the assurance benefits available under the Insurance Scheme has been increased by twenty percent (20%) in addition to the already admissible benefits.

Implications of the Amendments

The amendments to the three schemes by the Government of India, post the proposal made by the Union Minister of Finance in his Union Budget speech (for the financial year 2014-2015), have enhanced the applicability, scope and benefits provided to employees under the EPF Act. However, at the same time, it has also increased the liability of the employers who would now be responsible to enroll additional eligible employees and to contribute on the increased statutory wage ceiling.

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