The government amended the Employees’ Pension Scheme (EPS), 1995 to ensure that EPS members with less than 6 months of contributory service also receive withdrawal benefit. This amendment will benefit more than 7 lakh EPS members every year who leave the scheme with less than 6 months of contributory service.
According to a notification by Ministry of Labour & Employment,"Central Government has modified the Table D and has ensured that every completed month of service rendered is taken into account to give proportionate withdrawal benefit to the members. The amount of withdrawal benefit will henceforth depend upon the number of completed months of service rendered by the member and the wages on which EPS contribution was received. The above measure has rationalized the payment of withdrawal benefit to members. It is estimated that every year more than 23 lakh members will benefit from this modification of the Table D."
The notification further added that every year, lakhs of EPS 95 members leave the scheme prior to rendering the requisite 10 years of contributory service for pension. Such members are given withdrawal benefit as per the provisions of the scheme. More than 30 lakh withdrawal benefit claims were settled in the financial year 2023-24. Till now, the withdrawal benefit was being calculated on the basis of the period of contributory service in completed years and the wages on which EPS contribution has been paid.
Therefore, only after completing 6 months and above of contributory service, the members were entitled for such withdrawal benefit. Consequently, the members leaving scheme, before contributing for 6 months or more, used to get no withdrawal benefit.
This was a cause of many claim rejections and grievances as many members were exiting without having less than 6 months of contributory service. During the financial year 2023-24, approximately 7 lakh claims for withdrawal benefits were rejected due to contributory service being less than 6 months. Henceforth, all such EPS members who have not attained the age of 58 years as on 14.06.2024 will become entitled for withdrawal benefit.
Earlier, the calculation under erstwhile Table D ignored the fractional period of service rendered for less than 6 months after each completed year. This resulted in lesser amount of withdrawal benefit in many cases. With the modification of Table D, the Contributory service for calculating the withdrawal benefit will be now considered in completed months. This will ensure fair payment of withdrawal benefit. E.g. a member taking withdrawal benefit after 2 years and 5 months of contributory service & wages of 15,000/- per months was earlier entitled to Rs. 29,850/- withdrawal benefit. Now he will receive Rs. 36,000/- withdrawal benefit.
"The erstwhile Table D of the Employees’ Pension Scheme (EPS), 1995, which ignored the fractional period of service under 6 months after each completed year has been amended. This amendment by the Government shall allow members with less than six months of service to withdraw their pension benefits. This shall specifically benefit temporary or short-term employs as well as provide people with wider social security," said Manmeet Kaur, Partner, Karanjawala & Co.
Jasmine Damkewala, Senior Partner at Circle of Counsels (Law Firm) and Advocate-on-Record, Supreme Court of India said,"Under the Employees Pension Scheme 1995 formulated within the Employees Provident Fund Organization (EPFO) an employee can normally withdraw funds after a service of 10 years. This withdrawal can be for medical or other reasons. However, the time bracket of requirement of 10 years service was handicapping. Accordingly, an employee could at best only help himself or his children or parents of a certain age. Now with the reduction in the capping of 10 years, an employee will be able to pay for the medical expenses at an age when the protection is needed in most; namely, at the beginning of one’s career when it is extremely low on savings and unprepared for emergencies or big life events.
Earlier, it was individuals who had reached the retirement age of 58 but had not served for ten years or more since the said employee may have joined the organization after age 48 and not eligible for a monthly pension could still withdraw the entire amount from the EPS account in a single payment. But now, an employee can avail of the facility of withdrawal almost immediately after joining service if he has completed 6 months. Needless to say, this would usher in a huge amount of investment by the concerned Department since many more employees would get covered within the same and accordingly, is an extremely positive and ambitious move."
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