The EPS-95 Higher Pension has faced a lot of confusion and explanation on its calculations. Further, Hon’ble Supreme Court held the requirement of the members to contribute at the rate of 1.16% of their salary to the extent such salary exceeds Rs.15000/- per month as an additional contribution under the amended scheme to be ultra vires 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 necessary adjustments to the Scheme within a period of six months.
For implementing the above direction, all aspects of the matter including legal and administrative were examined in detail. It was decided that since the Code on Social Security,2020 (the Code ) has already been notified, it would be appropriate to bring relevant provisions of the Code into effect.
Earlier also section 142 of the Code was operationalized as a singular provision. The Code also provides for the repeal of the EPF & MP Act. Accordingly, certain provisions of the EPF & MP Act get repealed while giving effect to the relevant provisions of the Code.
The spirit of the EPF & MP Act, as well as the Code, do not envisage contributions from the employees into the pension fund.
Accordingly, keeping in mind the letter and spirit of the EPF & MP Act and the Code, it has been decided to draw 1.16 % additional contribution from within the overall 12% of the contribution of the employers into the provident fund.
This provision is retrospective in nature and in line with the directions given by the Hon’ble Supreme Court. Accordingly, the Ministry of Labour & Employment issued two notifications on May 3, 2023, implementing the above.
With the issue of the above notifications, all the directions of the Hon’ble Supreme Court contained in the judgment dated 04.11.2022 have been complied with.
EPFO Calculations
The Labour Ministry has issued a notification stating that for members who opt for higher pension and whose application is accepted, the employer’s contribution to EPS shall be 9.49 per cent (i.e. 8.33% + 1.16 per cent).
The additional contribution of 1.16 per cent on wages exceeding Rs 15000 shall come in from the 12 per cent overall employer contribution. Necessary adjustments will be made to the employees EPF account (i.e. the EPF corpus will reduce and the additional amounts will move to the EPS). This will be retrospective and will take effect from September 1, 2014.
The employees opting for the higher pension will not have to pay the additional 1.16% contribution on salary above Rs 15,000 from their salary. This has to deposited by from the employer’s overall contribution of 12% towards EPS and EPF.
The missing dues for EPS contribution with interest can be either transferred from the EPF account if it has sufficient balance or in case of a shortfall the balance amount will have to be deposited from the member’s bank account.
What Factors the Higher Pension will Depend
The pension amount under EPS 95 depends primarily on two factors: length of service and average salary of the past 5 years.
The higher EPS pension will be highly advantageous for people who have seen a steep salary rise closer to retirement.
The higher your last 5 years’ basic salary, the bigger will be your pension and the higher will be your return on additional contributions.
