How has the salary ceiling for calculating pension changed?
The salary ceiling in the year 1995 when the scheme was
introduced was ₹3500. It was raised to ₹5000 in 1997. The ceiling was revised
to ₹6,500 in 2001, and further to ₹15,000 in 2014. So taking the ceiling of
₹15,000, the pension contribution works out to ₹1,250 now (8.33% of ₹15000).
Why the confusion now?
The EPFO had fixed the salary ceiling for calculation of
pension at various points in time. However, in 1996, it passed an amendment
which gave an option for the employer and the employee to contribute the full
salary to pension. For example, if the basic wage and DA came to ₹20,000, the
statutory ceiling to be taken for pension calculation was ₹5,000 at the time.
The 1996 amendment provided an option for contributing 8.33% of the full salary
of ₹20,000 towards pension.
Why is this a legal issue?
A majority of employees remained unaware about the amendment
for almost 10 years post the amendment. When they did approach the EPFO based
on the 1996 amendment, the institution dismissed their claims saying the
cut-off day to opt for the higher pension was one month from the date of the
amendment.
Some employees filed writ petitions in High Courts which
ruled in their favour. The EPFO moved the Supreme Court against the order. In
2016, the SC too ruled in favour of employees and said there was no cut-off day
for the 1996 amendment.
If you are still employed, could you expect a higher
pension?
For those in service, the benefit of getting higher pension
won’t be available. For, the EPFO again amended the pension contribution norm
in September 2014. That amendment fixed the salary cap of ₹15,000 for pension contribution
and did away with the practice of voluntary contribution, according to Salil
Sankar, Regional PF Commissioner, Chennai, EPFO.
He also pointed out that the amendment provided for
employees to opt for continuing the pension contribution above the ceiling
along with the 1.66% contributed by the government. However, the time frame for
that was only six months which is extensible by another six months.
So employees who did not opt for higher pension in that time
frame are not eligible as per circulars issued by the EPFO in this regard.
Employees who retired from service prior to the September 2014 amendment are
eligible for higher pension provided they pay all the arrears in contribution
along with interest.
Employees from organisations whose PF is managed by trusts
are also not eligible as per EPFO, but that is now being challenged in court.
(Reproduced from the Hindu dated December 17, 2017)