Post Nov 2022 SC ruling, EPFO issued 16,282 higher pension payment orders under EPS

• Around 16,282 pension payment orders have been issued so far by the Employees’ Provident Fund Organisation (EPFO) to members and pensioners who had applied for higher pension under the Employees’ Pension Scheme (EPS).

Highlights:

Background and Supreme Court Ruling

• The Supreme Court's November 2022 judgment allowed EPS members as of September 1, 2014, to opt for higher pensions.
• Employees could contribute 8.33% of their actual salaries, exceeding the earlier pensionable salary cap of ₹15,000/month.
• This amendment reopened the option for higher contributions, leading to a surge in applications.

Status of Applications and Approvals

• Applications Received: 17.49 lakh applications for higher pension were submitted, including 2.7 lakh from pre-2014 retirees.
• Processing Updates: Out of 14.37 lakh valid applications, 16,282 pension payment orders have been issued.
• Rejections: Approximately 2.6 lakh applications were rejected, with higher rejection rates for pre-2014 retirees.

Financial Implications

• Estimated Fund Impact: A depletion of ₹1,86,920 crore is projected if 50% of applications are approved.
• Average Deficit per Member: Based on sample data, each member opting for higher pension may need to contribute ₹25 lakh.
• Actuarial Analysis: Complete financial assessments will only be possible after processing all applications.

Pending Applications and Challenges

• Pending Forms: Over 6 lakh applications await validation, while 3.12 lakh forms remain with employers.
• Efforts to Expedite Processing: EPFO aims to clear applications within three months and plans to engage retired officials for assistance.
• Demand Letters: 1.19 lakh demand letters have been issued to post-2014 employees, while pre-2014 retirees received only 21 letters.

Issues with Exempted Establishments

• Contributions in some exempted establishments are restricted to the wage ceiling, adding complexity to the approval process.

Application Deadlines and Next Steps

• Deadline Extensions: The EPFO extended deadlines multiple times, with the last date for employers being December 31, 2023.
• Processing Criteria: Applications with complete information are prioritized, and additional amounts are diverted from provident fund accounts or paid directly by members/employers.

Prelims Takeaways

• Employees’ Provident Fund Organisation (EPFO)
• Employees’ Pension Scheme (EPS)