More than 40 private-sector employees have received relief from the Bombay High Court in their fight for higher pensions under the Employees' Pension Scheme (EPS), 1995. The court set aside orders issued by the Employees' Provident Fund Organisation (EPFO) rejecting their applications and directed it to process and allow the claims within eight weeks.
The employees belonged to establishments including Abbott India, Tata Communications, Raymond Steel and BEST Undertaking. In its October 19 judgment, Justice Sandeep V Marne directed the organisation to process and allow the employees' joint-option applications within eight weeks.
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The case centred on whether the EPFO could reject an employee's application for a higher pension solely because the employer's PF trust rules capped contributions at the statutory wage ceiling or did not specifically provide for higher-pension contributions.
“The common issue of law which is involved in these Petitions is whether private trust rules of a provident fund trust of an exempted establishment under the Employees' Provided Fund and Miscellaneous Provisions Act, 1952 (EPF Act) can govern the contribution to the Employees' Pension Fund of employers or restrict the exercise of Joint Option under paragraph 11(3) /11 (4) of Employees Pension Scheme,1995 (EPS, 1995),” as per the ruling document.
The Bombay High Court ruled that an employee's joint option for a higher pension could not be rejected merely because the employer's PF trust rules capped contributions or did not provide for the higher-pension option.
The Bombay High Court set aside the EPFO orders rejecting the employees' applications and directed the authorities to process and allow their joint options for a higher pension within eight weeks. "With the above directions, Petitions are allowed and disposed of. There shall be no order as to costs," the court said.
Can All EPFO Members Claim A Higher Pension Under The Ruling?
No, the Bombay High Court's decision does not make higher pensions available to all EPFO members automatically. Employees still need to satisfy the eligibility criteria and contribution requirements under EPS-95.
The ruling establishes that PF trust rules cannot, on their own, be the sole reason for rejecting a higher-pension application from an eligible employee.
What Is The Difference Between PF And EPS Contributions?
Both employees and employers contribute to the Employees' Provident Fund (EPF), with a part of the employer's contribution going towards the Employees' Pension Scheme (EPS), as per the scheme's rules.
The statutory wage ceiling sets the salary limit used to calculate contributions. The EPS wage ceiling was increased to Rs 15,000 per month in 2014 and further raised to Rs 25,000 from September 17 this year.
Employees who made PF contributions on their actual salaries, even when these exceeded the wage ceiling, can apply for a higher pension if they meet the scheme's eligibility requirements.
To do so, the employee and employer must submit a joint option, requesting that pension contributions be calculated on the higher salary rather than being limited to the statutory wage ceiling.
Why Did The EPFO Reject The Claims?
Some companies operated their own provident fund (PF) trusts after receiving an exemption from the standard EPF system. The rules of these trusts either limited contributions to the statutory wage ceiling or did not specifically allow higher-pension contributions.
The EPFO cited these restrictions while turning down the employees' joint-option applications. In certain cases, it also raised concerns about missing documents and contributions on specific salary components.
The employees challenged the rejections, maintaining that the rules of their employers' PF trusts should not take precedence over the provisions of the Employees' Pension Scheme (EPS), 1995.
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