The Employees' Provident Fund Organisation’s (EPFO) field officers will have to complete the scrutiny of joint applications by employees and employers confirming that they wish to apply for higher pension on actual salary within 20 days.
“…applications for validation of joint option shall be scrutinised expeditiously and it shall be ensured that the demand letter to employer/communication to employer is issued for providing any additional proof or evidence or correct any mistakes/errors including (those) made by employers/pensioners in respect of each application for validation of joint option within 20 days of receipt of the application in the login of the dealing assistant,” the EPFO circular issued on Friday said.
For employees, the deadline for choosing the higher pension option under the Employees’ Pension Scheme (EPS) 1995 is June 26. It will then have to be validated by the employer, followed by EPFO’s field officers taking it up for assessment. They will verify the uploaded data and documentation and as per the latest EPFO circular, they will have to do so within 20 days of having received the application.
Also read: Deadline for choosing higher pension option extended to June 26: Your key questions answered
Higher pension after Supreme Court’s November 2022 order
Employees who were members of EPFO and Employees’ Pension Scheme (EPS), prior to September 1, 2014, and who continue to be in service but had missed choosing the higher pension option earlier can apply for a higher pension.
Those who retired before this date and had signed up for the higher pension option will have to validate the information.
If you decide to opt for pension on your actual, and not statutory salary of Rs 15,000, you will have to make the decision to file a joint application with your employer for the purpose.
You have time till June 26 - the deadline was extended from May 3 earlier - to send in your application through the online facility provided on the EPFO’s member portal. EPFO enabled this facility following the Supreme Court’s order in November 2022 directing the organisation to provide employees with the option to choose a higher pension.
Also listen: Deadline extension to file application for higher pension: What’s in store for employees? | Simply Save
Pension to be calculated on actual salary
Currently, your employer deducts 12 percent of your basic salary as your Employees’ Provident Fund (EPF) contribution. The organisation also contributes an equal amount to create your retirement kitty. A part of it (8.33 percent) is directed to the EPS while the balance flows into your provident fund.
However, it is calculated on the statutory wage ceiling of Rs 15,000. So, at present, out of your employer’s contribution, Rs 1,250 (8.33 percent of Rs 15,000) goes towards EPS. This amount joins the pool created under EPS to pay regular pension income to member-employees with at least 10 years’ service and their dependent family members.
You can, however, now choose to direct 8.33 percent of your actual salary towards the pension pool, translating potentially into a higher pension post-retirement, thanks to the Supreme Court verdict in November 2022.
Additionally, 1.16 percent from your employer’s contribution will also flow into EPS, with the balance 2.51 percent being directed to your EPF.
In case you discover errors in your application after filing it, you can delete and submit it again. However, this will not be allowed if your employer has already validated the application.
Next, the EPFO officers will evaluate and approve your application to pave the way for a higher pension.
Several grey areas around the process and final pension formula persist, making it difficult for employees to exercise their choice. The Supreme Court’s order allowed EPFO to retain the right to revise the formula to compute pension. Currently, it is calculated as pension = pensionable salary (average of last 60 months’ salary) x number of years of contribution / 70.
If the EPFO were to modify the definition of pensionable salary, as it has done earlier, which results in a pension lower than what the current formula is likely to yield, employees and pensioners could be in a fix. This is because there is no clarity on whether employees will have the option to withdraw the application in future if the new formula, if any, does not work in their favour.
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