All Employees Can Opt For Epfo Pension SCheme: SC

What’s in today’s article:

• About EPS (Background, Provisions, EPS Amendment 2014)
• Sasikumar Case (Kerala High Court’s judgement)
• Supreme Court’s judgement 

Why in news?

• In a significant ruling, the Supreme Court has upheld the Employees’ Pension (Amendment) Scheme, 2014.

About Employees’ Pension Scheme:

• EPF Pension which is technically known as Employees’ Pension Scheme (EPS), is a social security scheme provided by the Employees’ Provident Fund Organisation (EPFO).
  • The scheme was first launched in 1995.
• The scheme makes provisions for employees working in the organized sector for a pension after their retirement at the age of 58 years.

EPS (Amendment) Scheme, 2014:

• Through the EPS Amendment which became effective from 1 September 2014, the conditions of membership of the EPS Scheme underwent a change.
• Through the amendment, the EPS scheme was now applicable to such employees who on or after 16 November 1995 became a member of the EPF Scheme and whose monthly salary on the date of joining was less than or equal to INR 15,000.
  • In the original scheme, introduced in 1995, this salary limit was INR 6,500.
• Further, the employees were required to contribute at the rate of 1.16% of the salary exceeding INR 15,000 as an additional contribution to the contributions payable by them under the EPF Scheme.
• The maximum pensionable salary was set at INR 15,000 per month.

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The Sasikumar Case (2014):

• The petitioners in Sasikumar case were employees working in different establishments and had approached the Kerala High Court.
• The petitioners challenged the validity of the EPS Amendment on the ground that the same had placed them in an adverse position by making it onerous for them if they contribute towards the pension fund based on their actual salary.
• It was also argued that the cap of INR 15,000 was unrealistic and had no relation to the actual salaries drawn by employees across the country.
• The Kerala High Court held in the petitioners’ favour, observing that nowhere in the EPF Act does it allow an additional rate of interest to be imposed for making contributions based on the actual salary of the employees.
• In view of the above, the Kerala High Court set aside the EPS Amendment along with all consequential orders and proceedings issued by the provident fund authorities based on the EPS Amendment.

Supreme Court’s Judgment (November, 2022):

• The EPFO had appealed against the Kerala High Court’s judgement of quashing the Employees’ Pension (Amendment) Scheme, 2014.
• A three-judge bench of the Supreme Court agreed with the changes brough in by the amendment and said “we do not find any flaw in altering the basis of computation of pensionable salary”.
• The court said the amendments to the scheme shall apply to employees of exempted establishments as they do for the employees of regular establishments.
  • There are about 1,300 companies in the list of the EPFO’s (Employees’ Provident Fund Organisation) exempted establishments.
• However, the court held the amendment requiring members to contribute an additional 1.16 per cent of their salary exceeding Rs 15,000 a month as ultra vires the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.