The Labour and Employment Ministry is considering slowly phasing out the system of exempted establishments or exempted provident fund trusts under the Employees' Provident Fund Organisation (EPFO), especially for non-compliance with the PF body’s norms, government sources said. Though in its initial stage, the consideration has been prompted by a rise in applications for surrender of exempt status by such PF trusts. This has prompted additional measures from the government for verification and audit of exempted establishments to ensure compliance by them. There have been instances when some trusts run by companies have not maintained their corpus properly or fallen short of the required compliance norms, and then surrendered their exempted status. “This creates liability then for the government to fulfill the payment obligations of these exempted establishments. That's why we are undertaking verification and audit of such trusts. Slowly we'll move away from this system,” a government official said. In financial year 2024-25, around 33 exempted establishments have surrendered their exempt status, over 73 per cent increase from 19 establishments that had surrendered in the previous financial year 2023-24. As of March 31, 2023, there were 1,002 exempted establishments managing a corpus of Rs 3.52 lakh crore of 31.20 lakh members. Exempted establishments maintain their own provident funds from the EPF contribution from their employees and are required to comply with 31 terms and conditions as detailed in Section 27AA of the EPF Scheme, 1952. They are required to provide interest rate at the same level as announced by the EPFO and deposit only the Employees’ Pension Scheme (EPS) component of the employees’ contribution with the EPFO. The EPFO had mandated the exempted establishments to file mandatory monthly returns in 2014. The requirement for online filing of monthly returns was mandated in March 2017. The EPFO has been undertaking a monthly ranking exercise for exempted establishments since July 2017, according to which companies are ranked out of a total score of 600 based on various compliance requirements. 100 points each are allotted for transfer of fund before due date, investment, remittance to the trust, interest declared, claim settlement and audit of accounts, taking the total score to 600. Several exempted establishments have been approaching the EPFO for surrendering their exempt status. In August 2024, the EPFO had launched an online module for surrender of exemption by establishments to ensure ease of doing business and reduce the time and effort by providing facilities such as online submission of application, validation of applications and transfer of past accumulations of the members.
