Employees’ Provident Fund Organisation (EPFO)

  • The Employees’ Provident Fund Organisation (EPFO) is one of the two main social security organization under the Government of India’s Ministry of Labour and Employment and is responsible for regulation and management of provident funds in India, the other being Employees’ State Insurance.
  • It is a statutory body that came into existence under the Employees’ Provident Fund and Miscellaneous Provisions Act, of 1952.
  • The Act and Schemes framed there under are administered by a tri-partite Board known as the Central Board of Trustees, Employees’ Provident Fund, consisting of representatives of Government (Both Central and State), Employers, and Employees.
  • The Board administers a contributory provident fund, a pension scheme and an insurance scheme for the workforce engaged in the organized sector in India.
  • The EPFO’s top decision-making body is the Central Board of Trustees (CBT). The Board is assisted by the Employees’ PF Organization (EPFO), consisting of offices at 122 locations across the country.
  • It is one of the world’s largest organizations in terms of clientele and the volume of financial transactions undertaken by it.
  • It also manages social security agreements with other countries. International workers are covered under EPFO plans in countries where bilateral agreements have been signed.
  • The EPFO is under the administrative control of the Ministry of Labour and Employment, Government of India.

EPFO Schemes

  • The Board operates three schemes namely
    • The Employees’ Provident Funds Scheme 1952 (EPF)
      • Accumulation plus interest upon retirement and death.
      • Partial withdrawals allowed for education, marriage, illness and house construction.
      • Housing scheme for EPFO members to achieve the Prime Minister’s vision of Housing for all by 2022.
    • The Employees’ Pension Scheme 1995 (EPS)
      • The monthly benefit for superannuation/benefit, disability, survivor, widow(er) and children.
      • Minimum pension of disablement.
      • Past service benefit to participants of the erstwhile Family Pension Scheme, 1971.
    • The Employees’ Deposit Linked Insurance Scheme 1976 (EDLI)
      • The benefit is provided in case of the death of an employee who was a member of the scheme at the time of death.
      • The benefit amount is 20 times the wages, a maximum benefit of 6 Lakh.

Employees Pension Scheme (EPS):

  • It is a social security scheme that was launched in 1995.
  • The scheme, provided by EPFO, makes provisions for pensions for the employees in the organized sector after the retirement at the age of 58 years.
  • Employees who are members of EPF automatically become members of EPS.
    • Both employer and employee contribute 12% of employee’s monthly salary (basic wages plus dearness allowance) to the Employees’ Provident Fund (EPF) scheme.
    • EPF scheme is mandatory for employees who draw a basic wage of Rs. 15,000 per month.
    • Of the employer’s share of 12 %, 8.33 % is diverted towards the EPS.
    • Central Govt. also contributes 1.16% of employees’ monthly salary.

Who gets a pension under the EPS?

  • Employees should serve for at least 10 years and retire at age 58, after 58 years of age employees get pension under the EPS. If a member leaves employment between ages 50 and 57, they can avail early (reduced) pension.
  • Formula to compute the monthly pension:
    • Monthly pension = pensionable salary x pensionable service / 70, based on a pro rata basis linked to maximum monthly pensionable salary of Rs 6,500 for pensionable service up to September 1, 2014, and Rs 15,000 thereafter.

What is the pension structure that exists currently?

  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 did not provide for a pension scheme. The EPS, administered by the EPFO, came into being in 1995. The pension fund was to comprise a deposit of 8.33% of the employers’ contribution towards the PF corpus.
  • At the time of the introduction of EPS, the maximum pensionable salary was Rs 5,000 per month. This was subsequently raised to Rs 6,500 and, from September 1, 2014, to Rs 15,000. The pension contribution currently is 8.33% of Rs 15,000, that is, Rs 1,250 — unless the employee and employer have opted to contribute at actual basic salary exceeding the pensionable salary.
  • The Government of India contributes 1.16% to an employee’s pension. Employees do not contribute to the pension scheme.
  • Both employees and employers contribute 12% of the employee’s basic salary, dearness allowance and retaining allowance, if any, to the EPF.
    • The employee’s entire contribution goes to EPF, while the 12% contribution by the employer is split as 3.67% to EPF and 8.33% to EPS.

EPFO UAN (Universal Account Number)

  • It is a 12 digit number allotted to an employee working in an organization. If a person has multiple member ID’s issued by multiple organizations, all the ID’s will come under one single UAN number which will be the same for a lifetime. This number will not change even when an employee changes his organization.
  • The various benefits are attained due to UAN.
    • Reduces confusion of multiple ID’s and will have one single UAN number
    • Easy transfer and withdrawal of claims
    • Online-pass book
    • SMS services
    • Online KYC update
    • Download UAN EPF book
    • Check EPF balance online
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