The employee's provident fund act, 1952 (2)

EPF

1. The Employee's Provident Fund Act, 1952 Syed Najaf ALi

2. Introduction What is a Provident Fund ? The EPF is created by the Employees Provident Fund Organization (EPFO) of India, a statutory body of the Indian Government under the Labour and Employment Ministry . I t is a mandatory, tax-qualified, defined, contribution retrial benefit plan wherein equal contribution at the specified rate is made by the employer and the employee. This investment made by millions of employees across India are pooled together and invested by a trust.

3. How to become a EPF Member : You, as your own, can not become an EPF Member. To become an EPF member, you have to work in an establishment which is covered under EPF and MP ACT, 1952. • If 20 or more employees are working in an establishment, EPFO will cover that establishment . • If Employer and Employees of an establishment desires, that establishment can voluntarily opt for EPF coverage even if the employees employed therein is less than 20. • If your establishment is not covered and at least 20 employees are working in that establishment , you can approach EPFO to cover it.

4. Applicability & Scope : The Act extend to whole of I ndia except the state of J & K. Organization ,Establishment employing 20 and more employee are covered under this act. The central Govt. after giving 2 months notice by notification in the official gazette may apply the provisions of this Act to any establishment employing less than 20 persons. Schemes Under this Act : There are three schemes under this Act which are as under- Employee Provident Fund Scheme Employee Pension Scheme Employee Deposit Linked Insurance Scheme

5. The Employee’s Provident Fund Scheme : This scheme came into force from 1 st November-1952 Employees drawing wages upto Rs.6500/ (Basic +DA) are eligible to become member of this scheme. The rate of contribution of employees towards this scheme is @ 12% of Basic + DA . The rate of contribution of employer towards this scheme is @ 3.67% of Basic + DA. The employer also contribute @1.10% as administrative charges towards this scheme. The total contribution of both the employer & employee towards this scheme is 15.67%.

6. Benefits Under this Scheme : Withdrawal benefit: A member can withdraw his EPF accumulation on the following conditions- Retired from the service after attaining the age of 58 years/ Attained the age of 50 years. Retired on account of permanent and total incapacity for work due to bodily/mental infirmity. Retired under voluntary retirement scheme. Migration from India for permanent settlement at abroad. Leaving India at least for one year. Retrenched from service. Discharged from service on receiving compensation under Industrial Dispute Act-1947. Resigned and not employed in any factory to which the Employees provident Fund scheme applies.

7. Partial Withdrawal/Advances : A member can withdraw the EPF accumulations/ non refundable advance from EPF scheme on following grounds- For self marriage. 7 years service is required .50 % of employee share. For marriage of son/daughter, brother, sister. 7 years service is required. 50% of employee share. For education of self,son,daughter.7 years of service is required and 50% of employee share. For medical treatment of self, spouse, son , daughter, father, mother. No service period is required. 6 times of wages or full of employee share whichever is less. For Purchase and construction of dwelling units (house/flats). 5 years service is required .36 times of wages. To meet natural calamities. No service period is required to avail this benefits.Rs.5000/ or 50 % of members share of contributions.

8. Repayment of housing loan.10 years service is required.36 times of wages. For purchase of site/plot.5 years of service is required.24 times of wages. Addition/alteration of house.5 years service is required.12 times of wages. Repair of house. same type of advance can be availed for alteration of house.10 years of service is required. 12 times of wages. Lockout or closure of the establishment. wages for at least 2 months not paid. No minimum service required. should be closed for 15 days. balanced should be there in employee share. Equivalent to the total of wages multiplied by no of months closed. Withdrawal prior to retirement.no minimum service required.at least 54 years of age.1 year before retirement.90 % of total of both the share.

9. Employee Pension Scheme: The employee pension scheme came into force w.e.f 16 th November-1995. Before this , there was “Employee Family Pension Scheme”. Which came into force from 1 st March-1971 The contribution towards this scheme is made by employer only. There is no contribution made by the employee W.e.f 16 th Nov-1995 . When the Employee family pension fund was in force ,the contribution was @8.84 % of Basic + DA out of 10%.The remaining 1.16 % was contributed to employee provident fund. The rate of contribution increased to 12 % w.e.f 22 nd September-1997 .The contribution toward family pension increased to 8.33% of Basic + DA. The central Govt also contribute @ 1.16% of the pay of the member. There is no provision for voluntary higher rate of contribution to this scheme. The rate of contribution is 8.33 % of highest wage celling of Rs.6500.00

10. Contribution Share to EPF & pension scheme W.E.F-NOV-1995 Employee’s Share (to EPF Fund) Employer’s Share (to EPF &FPF fund) 10% of Basic + DA 8.84 % of Basic + DA 1.16 % of Basic + DA Provident Fund Total:- 11.16 % Family pension Fund Total:- 8.84%

11. Contribution Share to EPF & Pen.SCHEME W.E.F-SEPT-1997 Employee’s Share (to EPF Fund) Employer’s Share (to EPF & Pen. fund) 12 % of Basic + DA 8.33% of Basic + DA 3.67% of Basic + DA Provident Fund Total:- 15.67% Pension Fund Total:- 8.33%

12. Membership Of the Employee’s Pension Scheme The scheme shall apply to every employee – who on or after the 16 th November-1995 becomes the member of the Employee Provident Fund Scheme-1952 or of the provident funds of the factories and other establishments exempted by the appropriate Govt. Who has been a member of the ceased Employees’ Family Pension Scheme,1971before the commencement of this scheme from 16 th November-1995. Who ceased to be a member of the Employees’ Family Pension Scheme,1971 between 1 st April,1993 and 15 th Nov-1995 Retention of Membership- A member of the Employees’ Pension Fund shall continue to be such member till he attains the age of 58 years or he avails the withdrawal benefit to which he is entitled or dies or the pension is vested in him whichever is earlier.

13. When pension can be applied for ? 1 . On superannuation. Age 58 years or More and at least ten years of service The member can continue in service while receiving this pension On attaining 58 Years of age, a EPF member cease to be a member of EPS automatically 2. Before superannuation. Age between 50 and 58 years and at least ten years of service The member should not be in service 3. Death of the member , Death while in service or Death while not in service 4. Permanent disability. Permanently and totally unfit for the employment which the member was doing at the time of such disablement

14. Types of Pension : There are different types of pension which are as under- Monthly Member Pension It is claimed on superannuation and before superannuation after completion of 10 years of service and attaining the age between 50 and 58 years. 2. Monthly Widow Pension This pension is being framed to provide financial assistance to the family members of a provident fund member who dies before completing the age of 50 and 58 years and not completing 10 years of service . This financial assistance is given to the widow along with 02 children. This pension is claimed by the wife of a member after death of the member while in service and not in service. The condition of 10 years service and 58 years of age is not required for claiming this pension.

15. 3.Monthly Children Pension Children pension is claimed only after death of the member . 02 children upto the age of 25 years or upto their marriage are entitled to get this pension along with widow/widower. 4.Monthly Orphan Pension This pension is claimed after the death of the member and widow/widower. 5. Disablement Pension This pension is claimed by member on permanent and total disablement during employment.

16. Formula/Method for Calculation of Pension: Monthly Member’s Pension = Pensionable Salary x Pensionable Service ___________________________________ 70 Pensionable Salary: T he average pay for the last contributing service in a span of 12 months is to be taken to determine the pensionable salary. Pensionable Service: The pensionable service is the total service rendered by the member for which the contributions are received under the Family pension Scheme,1971 (past service) and the Employees’ pension Scheme,1995 (actual service) In the case of the member who superannuates on attaining the age of 58 years and who has rendered 20 years pensionable service or more , his pensionable service shall be increased by adding a weightage of 02 years.

17. Example-1 (Pension for new entrants) Pensionable Salary Rs . 1500/ Pensionable Service 33 years Retirement Age 58 years Benefit of 2 years more than 20 years of service Pension = Rs1500 x (33 + 2 ) _________________ 70 = Rs . 750/ p.m Example-2 Date of birth of member : 20.11.37 Date of joining EPF Scheme,1971 : Sept.1971 Pensionable Salary : Rs.1500/ Date of retirement : 30.11.1995

18. In order to expedite the calculations of pension, two tables have been prepared .Table -A shows the quantum of pension payable at the age of 58 on the basis of the age attained on 16.09.1995. Table- A ___________________________________________________________ Age ELIGIBLE SERVICE AS AT EXIT As on ____________________________________________________________ 16.11.95 24 23 22 21 20 19 18 17 16 15 14 13 12 11 ____________________________________________________________________ 58 to 54 500 479 458 438 417 396 375 354 333 313 292 271 265 265 53 to 49 600 575 550 525 500 475 450 425 400 375 350 325 325 325 _____________________________________________________________________ Calculation: Age on retirement : 58 years Age on 16.11.95 : 58 years Pensionable service : 24 years (Eligible service at exit) Read the 1 st rows which shows the 58 to 54 age group, then read the column of eligible service at exit of 24 years. The intersected figure will be pension payable which is Rs.500/- p.m

19. Example -3 Date of birth : 26.1.43 Pensionable salary : Rs.2000/ Date of joining FPF : 1.9.1980 Date of retirement (exit) : 31.12.95 Subscribers want pension on retirement age which is not 58 years Calculation: Age on the date of retirement : 52 years 11 months Age on 16.11.95 : 53 years Pensionable service : 15 years As the member desires the pension at the age of 53 years which is earlier than 58 years a pension discounted by multiplying the pension at Table ‘A’ by discounting factor at Table B is given below- Table- ‘B’ _______________________________________________________________ Age at Retirement Discounting Factor _______________________________________________________________ 58 1.000 57 0.940

20. 56 0.884 55 0.831 54 0.781 53 0.750 52 0.750 51 0.750 50 0.750 ______________________________________________________________ In the present example first we have to read Table “A ’ in the second row age group 53 to 49 years against eligible service of 15 years at exit . The figure comes out to be Rs.375/ p.m which is payable at the age of 58 years. But in this case , the subscriber wants the pension immediately on retirement/ exit age i.e 53 years. The discounting factor, therefore has to be applied. In this case, the discounting factor as per T able “B ” is 0.75. The pension payable ,therefore will be: = Rs.375 x 0.75 = Rs.281.25 = Rs.281p.m

21. Benefits: A member can receive pension after putting in 10 years of eligible services .This period of minimum service is not applicable in the case of Widow’s pension/Disablement pension/ children's’ pension/orphan’s pension . The Widow’s pension, children’s pension and orphan’s pension is payable after only 30 days of actual contribution. A member can opt for discounted/reduced pension before the age of 58 but not earlier than 50 years. If a member opt for reduced pension his/her nominee or the widow / widower can get benefit of capital return equal to 100 times of monthly pension in lump-sump along with pension. Provision for nomination in the absence of the member’s family is made.

22. The option is also available to become a member of the Employee’s Pension Scheme,1995 w.e.f 01.04.1993 under certain conditions. On completing 33 years of pensionable service , the pension entitlement shall be 50 % of the members pay at the time of retirement. 60 % entitlement of pay on completion of 40 years pensionable service. Family pension cover for widow/ widower for life or until her remarriage and to two children upto 25 years of age, upon death of the member, be it in service, out of service or after receiving the pension on retirement. To further improve upon the benefits there is provision for valuation every three years by the actuary.

23. An Analytical Look at Enhanced Benefits: EFPS 1971 (Old Scheme ): 1. Monthly widow pension was payable if the employee had put in at least 3 month , reckonable service. 2. Monthly Family Pension was payable to only one person at a time. 3. No benefit were paid in case of permanent and total disablement during employment. 4. Only withdrawal benefits were paid if a member expired after leaving the employment and no pension to the widow was payable in such cases. EPS-1995(New Scheme ): 1 . Monthly widow’s pension is payable after one month’s reckonable service . 2. Monthly pension is paid to three persons at a time i.e widow/widower/two children. 3. Monthly pension is given to disabled persons on one month’s reckonable service. 4. Even after leaving service ,if a member expires, monthly pension is paid to the widow/widower and two children.

24. An Analytical Look at Enhanced Benefits: 5.Maaximum monthly family pension on a pay of Rs.5000/ p.m was Rs.1050/p .m(Rs.1750/ in case of 7 years of service) 6. No provision for nomination. 7. No provision for capital return. 8. No widow/children’s pension in case of death of the member whose account was not settled, if he was not in service. 9.Pension was available only 5.On pay of Rs.5000/ monthly family pension would be upto Rs . 1750/ plus Rs.875/ p .m to two children. 6. Pensions both in and outside the family can be nominated. 7. 100 times equivalent to pension is payable as return of capital if the pensioner opts for reduced pension. 8. Pension is available to widow/children to a holder of certificate of contribution, short service , even when he/she is out of employment. EFPS 1971 (Old Scheme ): EPS-1995(New Scheme ):

25. Documents required for Settlement of pension claim (Death). Original Death Certificate . Form No-10 D (in triplicate). 3 nos. of pass port size photo for each claimant. 3 nos. of pass port size joint photo (husband with wife) List of family members duly certified by the employer. List of lagal heirs. Age proof of each claimant. 8 . Details of bank accounts of the claimants.(nationalized bank)

26. Employees Deposit Linked Insurance Scheme :- 1976 This scheme came into force from 1 st August-1976 The employees deposit linked insurance scheme has been framed for the purpose of providing life insurance benefits to the employees of any establishment or class of establishments to which the Act applies. Contributions:- The employer only contribute @ .5 % of Basic + DA towards this scheme subject to the maximum celling of Rs.6500.00 PM. The employer also contribute @.01 % of Basic + DA , as administrative charge towards administration of this scheme. Benefits:- The nominee/legal heirs of the deceased member will get insurance benefit upto Rs.1 ,30,000/.The minimum insurance benefit under this scheme depends on the average balance of wages during preceding 36 months from the date of application.

27. Nomination:- who will be a Nominee ? The family members of a EPF members will be nominee. Under EPF Act the definition of Family includes Husband, wife and children . So if the member is a married person ,his wife and children will be nominee. If the member is unmarried, his father and mother, brother, sister will be his nominee. The nominee may be more than one and the % of share may be differ from nominee to nominee. A member can nominate a person from in and out of his family.

28. DO'S FOR A MEMBER : While joining an establishment, furnish details of previous employment if any, with previous Provident Fund a/c number and scheme certificate . 2) In case of existing Provident Fund/ Pension a/c, apply for transfer of previous a/c number to the present a/c number . 3) Ensure that employer furnishes Form-5 with details of previous Provident Fund a/c no. to Employees ' Provident Fund Organization. 4) Execute Form-2, with details of self, nominee for Provident Fund and pension and details of family , so that it is forwarded to Employees ' Provident Fund Organization by the employer . 5) Ensure that particulars furnished are correct in all respects . 6) Ensure that enrolment to Employees' Provident Fund/ Employees' Pension Scheme is done immediately on the date of joining the establishment. 7) Ensure that Provident Fund is deducted at statutory rate from the total wages i.e. basic, D.A.and retaining allowance if any.

29. 8) If desirous of enhancing rate of contribution, inform your willingness with the higher rate opted and forward to Employees' Provident Fund Organization through employer and allow employer to deduct at enhanced rate from the wages. 9) If the wages drawn is more than Rs . 6500/-, intimate your willingness to contribute on the whole salary as per higher rate to Employees' Provident Fund Organization through employer. Employer can also contribute on the whole amount drawn as wages under intimation to Employees' Provident Fund Organization. 10) Check up periodically with the employer that contribution and other charges are paid to Employees' Provident Fund Organization and ensure it's correctness by verifying the Form-3A (contribution card) maintained by the employer.

30. FORMS USED UNDER THIS ACT :- Form-2-nomination cum declaration Form-3A-monthly contribution card Form-5- details of new member Form-5 A- application for registration Form-5 IF-claim for EDLI Form-6A- annual contribution card Form-9 -details of new member Form-10- details of employees leaving services Form-10 C-withdrawal of EPS

31. Form-10 D- Pension Claim Form-11- declaration by the employee Form-12 A-details of monthly Chillan and employee. Form-13-Inter Regional transfer of EPF Form-13 A-Intra Regional transfer of EPF Form-19-withdrawal of EPF Form-20-Death claim Form-23-Annual statement of accounts .(PF Slip) Form-ASR-Details of bank accounts of a member whose money has returned back from bank.

32. DON'TS FOR A MEMBER : Don't give false declaration and incorrect particulars to Employer and Employees Provident Fund Organization. 2) Don't fall victim to middleman/ agents. Please Contact PRO for Doubts / Clarifications if any . 3) Don't allow Employer to deduct his own share of contribution or administrative charges payable by him from your wages . 4) Don't be a party to misclassification of allowances of your wages, with a view to avoid payment of Provident Fund .