Even as the labour ministry has finally notified a minimum monthly pension of Rs 1,000 to subscribers of the Employees’ Pension Scheme, it has introduced fresh provisions to cap the number of beneficiaries as it tries to keep the scheme viable for the government.
Under the fresh guidelines, only those workers whose starting salary is Rs 15,000 or less will be eligible to become members of the EPS.
“No diversion to EPS shall be made for all new PF members on or after September 1, 2014 having (pay) more than Rs 15,000 at the time of joining,” the Employees’ Provident Fund Organisation has stressed in a recent circular.
This is a significant change from the previous system, where in all members of the EPFO were also automatically made subscribers of the related EPS.
Earlier, of the 24 per cent contribution deducted from a worker’s monthly basic pay for provident fund, 8.33 per cent was diverted to the EPS.
The EPFO has also stressed that new members will no longer have the option of contributing over the defined wage ceiling of Rs 15,000 to the EPS. Existing subscribers who have till now been contributing over the Rs 6,500 wage cap to the EPS, however, have been given an option to continue contributing over the increased wage cap but they would also have to contribute the government subsidy of 1.16 per cent on the excess amount.
“The fresh option is to be exercised within a period of six months…. if it is not exercised, it shall be deemed that the employee has not opted in allowing contribution over the wage ceiling,” said the EPFO, adding that the excess contributions will instead be diverted to the EPF account of the member.
The new norms have also devised a fresh calculation for assessing the pensionable salary where in the period for calculating the average monthly pay has been increased from 12 months to 60 months.
Meanwhile, the pensionable salary would be calculated on a pro-rata basis separately for the period up to August 31, 2014 and the subsequent period using the wage ceiling of Rs 6,500 per month and Rs 15,000 per month respectively. Similarly, the withdrawal benefit would also be based on the weighted wages at different wage ceilings.