No Need For Extra 1.6% Contribution On Salary Above Rs 15,000 For Higher Pension: SC

In a significant development, the Supreme Court has held that the provisions contained in the Employees’ Pension Amendment (Scheme), 2014, are legal and valid. It has quashed the threshold limit of Rs 15,000 monthly salary for joining the pension fund. The apex court said that after the amendment of the scheme, the maximum pensionable salary was to be kept at Rs 15,000 per month, raising the earlier ceiling of Rs 6,500 per month.

The SC bench, comprising Chief Justice U U Lalit and justices Aniruddha Bose and Sudhanshu Pardiwala, said “the requirement of the members to contribute at the rate of 1.16 per cent of their salary to the extent such salary exceeds Rs 15,000 per month as an additional contribution under the amended scheme is held to be ultra vires the provisions of the 1952 Act”.

The SC said that so far, as the present members of the pension fund are concerned, it has read down certain provisions of the scheme as applicable in their cases.

The SC order has given the EPFO members who have availed of EPS four months to opt and contribute up to 8.33 per cent of their actual salaries — as against 8.33 per cent of the pensionable salary capped at Rs 15,000 a month – towards pension.

The top court, which modified the verdicts of the Kerala, Rajasthan and Delhi high courts quashing the 2014 scheme, delivered the judgment on a batch of pleas, including those filed by the Employees’ Provident Fund Organisation (EPFO) and the Centre.

There are about 58.55 million subscribers to the Employees’ Provident Fund Organisation (EPFO) till 2021.

The SC said that the fund authorities shall implement the directives contained in the said judgment within a period of eight weeks. Employees who have not exercised the option to join the pension scheme must do so within six months, the bench said.

It added that eligible employees who could not join the scheme by the cut-off date should be given an additional chance as there was a lack of clarity on the issue in view of judgments passed by the high courts of Kerala, Rajasthan and Delhi.

The bench further held as invalid the condition in the 2014 scheme that required employees to make a further contribution at 1.16 per cent on salary exceeding Rs 15,000.

It held that the condition to make additional contribution on the salary exceeding the threshold limit to be ultra vires but added that this part of the judgment would be kept in suspension for six months to enable the authorities to generate funds.

The Employees Provident Fund Organisation and the Centre challenged the verdicts of the high courts of Kerala, Rajasthan and Delhi, which had quashed the 2014 scheme.

The Employees’ Pension Scheme Amendment

According to the Employees’ Pension Scheme, 1995, the maximum salary on the basis of which pension was to be calculated was Rs 6,500 per month. An amount of 8.33 per cent from the employer’s contribution (12 per cent) would go to the employee’s pension fund.

Later, on March 16, 1996, a proviso was added to the EPS. It gave the option to employees and employers to contribute more to the pension fund — at 8.33 per cent of the basic salary of the employee.

The Employees’ Pension Scheme was later amended in September 2014, which limited the maximum pensionable salary at Rs 15,000 per month. It was to give an option to the existing members as on September 1, 2014, to submit a fresh application, jointly with their employers, to contribute on salaries exceeding Rs 15,000 per month.

However, in this case, the employee will have to make a further contribution at 1.16 per cent on the salary exceeding Rs 15,000. Also, such a fresh option will have to be exercised in six months of the date of the amendment.

(With Inputs From PTI)

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