Employers may soon have to give workers a choice on where to park their retirement savings as well as match their contributions in case they opt for the National Pension System. These are some of the fresh amendments to the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, that are being planned by the labour ministry based on the announcements in the Union Budget 2015-16.
“Based on the Budget proposals, we are finalising fresh amendments to the EPF Act,” said a senior government official, adding that the amendments are likely to be tabled in Parliament when it reconvenes next month. The EPFO’s apex decision-making body — the Central Board of Trustees is likely to take a call on these proposals at a meeting on March 31. “Companies will have to give an option to their employees between the EPF and the NPS on where to deposit their retirement savings. They will keep track of the retirement plan for each employee with a back-end IT system,” said a senior government official.
Additionally, in case the worker chooses to switch to the NPS, employers will be expected to match the contribution on the lines of the EPF. Financial implications of such a choice on the EPFO’s Rs 6 lakh crore corpus are also likely to be examined by the labour ministry.
Finance minister Arun Jaitley had announced that workers would be given a choice to choose between the EPF and the NPS while for employees below a certain threshold of monthly income, contribution to EPF would be optional, without affecting or reducing the employer’s contribution. While the labour ministry had already finalised amendments to the EPF Act that would have expanded the coverage of the scheme as well as increasing savings by revising the definition of wage and mandating that employers must pay 12 per cent of the wage as PF contribution, the fresh amendments are required as it is mandatory for firms with more than 20 workers to contribute to the EPFO.
“Not doing this is in default of the Act and can lead to a penalty as well as imprisonment,” said a second a official, pointing out that at present, companies and workers contribute to the NPS over and above the EPF. However, trade union leaders are not happy with the move. “we have opposed this proposal even at the Board’s last meeting. The NPS is a retirement plan while the EPF gives social security,” said AD Nagpal, general secretary Hind Mazdoor Sabha and member, CBT.