New EPS rules leave out clause on higher pension

The Employees’ Pension Scheme (EPS)-2026, as approved recently by the Central Board of Trustees in the Employees’ Provident Fund Organisation (EPFO), has left out the contentious clause in the EPS-1995 that had provided a limited benefit to employees to exercise the option of pension on higher salary.

The new scheme had to be drafted in view of the Code on Social Security coming into force in November last year.

The clause in question – paragraph 11 (4) - was omitted because it was regarded as “obsolete”, stated an official document on the agenda for the meeting of the Board’s meeting on March 2. It was included at the time of amendments made to the EPS in August 2014, replacing a proviso that had envisaged limitless option for employers and employees to seek pension on higher salary for the employees. The sub-para had provided a maximum of one year to the employers and employees to exercise the option to contribute from salary exceeding ₹15,000 per month, which was the pensionable salary cap.

As several pensioners and contributing members of the EPS had complained that they could not exercise the option during 2014-15 due to the interpretation on cut-off date by the authorities, the Supreme Court, in its verdict in November 2022, permitted them to apply for higher PF pension. In December last, the government informed the Lok Sabha that of the around 15.24 lakh applications of the employees and pensioners forwarded by employers to the PF body till January 31, 2025 (which was the last date for submission of applications), almost all the applications had been disposed of. Against the net total of 3.93 lakh demand letters issued, nearly 2.33 lakh applicants had deposited the amount sought or given consent. Approximately 1.24 lakh applicants had been issued pension payment orders.

Originally, the EPFO was against the demand for pension on higher wages as it took the stand that the EPS-1995 was meant for economically weaker workers, who had proportionately contributed more than the high wage earners. The “reverse subsidy” was an “anomaly”, which was corrected by the modifications in 2014, the PF body had held, adding that there was a net actuarial deficit in the Employees’ Pension Fund.

Provident Funds norm

Notwithstanding the absence of any provision in the EPS-2026 for pension on higher wages, the new Employees Provident Funds Scheme (also cleared by the Board) rules, through para 9 (iv), have retained the arrangement for any employee and his employer to make a joint request in writing for allowing the former to contribute from such wages exceeding wage ceiling. Such an employee shall be entitled to the benefits, the rules state. Also, paragraph 19 of the rules refer to “additional voluntary contribution” by employees with employers being under no obligation to do so.