Amendment to EPS Withdrawal benefit provisions
The Ministry of Labour and Employment has amended the Employee Pension Scheme 1995 vide notification no GSR 326(E) dated 14.06.2024 introducing certain modification in withdrawal benefit provisions.
A. Withdrawal benefit for less than 6 months contributory service
What was the law before amendment?
Objective of EPS scheme is to provide employees working in organized sector with pension facility, after their retirement at the age of 58 years.
--->To Qualify for pension payments on retirement, member of EPS scheme has to have minimum 10 years of service (not necessarily continuous service).
---> If the member leaves the scheme before completion of 10 years, then a lump sum payment called 'withdrawal benefit' is given, instead of pension due to his/her early exit from the scheme.
--->Even in that, only those members who had completed 6 months or more
of contributory service are eligible for this withdrawal reward.
Consequently, members leaving the scheme before contributing for 6 months or more, did not avail any withdrawal benefit. This resulted in numerous claim denials and grievance, as many members were exiting without having six months of contributory service.
Amendment:
CG amended the EPS scheme to ensure that EPS members with less than 6 months of contributory service will also receive withdrawal benefit as per the provisions of the scheme.
What is contributory service:
contributory service means the period of actual service rendered by a member, for which the contributions to the fund have been received or are receivable.
Likely Impact:
As per PIB press release, released by ministry, the new amendment will benefit more than 7 lakh EPS members every year who leave the scheme with less than 6 months of contributory service.
B. Table D modification:
What was the law before amendment?
As mentioned above, in cases where the member leaves the scheme before completion of 10
years, the withdrawal benefit is calculated as per Table D which is used to calculate the lumpsum payment an employee is eligible to receive.
What is Table D: Table D provides what would be the return on contribution , on exit, corresponding
to the number of months in service.
Relevant parameters for withdrawal benefit calculation (as per Table D)
---> As per Table D existing provision, withdrawal benefit is calculated based on
a) the period of contributory service in completed years and
b) the wages on which
EPS contribution has been paid.
--->Accordingly, for calculation of completed years
a) service exceeding 6 months was considered as one completed year and
b) The fractional period of service rendered for less than 6 months after each completed year, shall be ignored.
a) service exceeding 6 months was considered as one completed year and
b) The fractional period of service rendered for less than 6 months after each completed year, shall be ignored.
Amendment:
With the modification of Table D, the Contributory service for calculating the withdrawal benefit will be now considered based on months of service completed by the member and not completed years.
So, for broken service period of up to 5
months where there was no benefit earlier, the employee will receive
proportionate lumpsum benefit for such period also.
Likely Impact
As per PIB press release, released by ministry, it is estimated that every year more than 23 lakh members will benefit from this modification of the Table D.
Source:
https://www.epfindia.gov.in/site_docs/PDFs/Circulars/Y2024-2025/Circular_Pension_TableD_24062024.pdf