The confusion of the EPS members regarding the additional 1.16 per cent contribution in the EPS Higher Pension has been resolved.
EPFO has finally come out with a mechanism for contribution towards Higher EPS Pension, as per which members opting for Higher Pension will no longer have to contribute an additional 1.16% of their salary. Rather, this contribution will be made from the employer’s share to the employee’s EPS account.
EPFO has amended the rule regarding deduction of contribution with effect from September 1, 2014 regarding EPS pension. Because, the Supreme Court in its judgment declared this rule invalid on 4 November 2022 and asked EPFO to introduce a replacement system.
In a circular issued on 3 May 2023, the Ministry of Labor and Employment said that out of the total 12% contribution of employers in PF, it has been decided to take an additional contribution of 1.16%. Alok Agarwal, partner, Deloitte India, said EPFO has given an important clarification that the additional 1.16 per cent contribution will be diverted from within the total 12 per cent of the employer’s PF contribution.
Employees whose salary is less than the salary limit fixed by EPFO have to contribute to EPF and EPS. For employees opting for higher pension, the EPFO was asked to pay an additional 1.16% on the portion of their basic pay which was above the wage ceiling. But as per the Supreme Court judgment and the existing instructions, the employees will have to pay only 12% of the actual basic pay and no additional amount will have to be paid for the higher pension.
Alok Agarwal, partner, Deloitte India, said that apart from the additional contribution in the higher pension application, doubts were raised on several points by employers and employees. Many EPS members still did not fully understand the financial parameters and the use of joint options.
In such a situation, increasing the date of application from 3rd May to 26th June has been the right decision. At the same time, the new system of EPFO regarding contribution is a big relief for EPS members.
