It is possible to claim higher pension from EPFO on the basis of higher contributions made and accepted by EPFO earlier, even if one had not submitted joint option with your employer for higher contribution. By doing so, EPFO has removed an obstacle being faced by claimants of higher pension on the basis of higher contribution and made the process easier.
This has been done to smoothly implement the orders of the Supreme Court (SC) on paying pension to employees on the basis of higher contributions made earlier on the basis of actual salary. The Employees' Provident Fund Organisation (EPFO) has instructed its regional offices not to ask for formal joint option of employee and employer where earlier contribution towards Employees' Pension Scheme (EPS) by them was higher than the statutory wage limit.
EPFO, in its circular dated January 22, 2019, has said that if an employer and employee have contributed under the EPF Scheme, 1952, on wages higher than the statutory wage limit without joint option of employee and employer and the EPF account of the concerned employee has been updated by the EPFO on the basis of such contribution received, then by action of employee, employer and EPFO, it can be inferred that joint option of employee and employer has been exercised and accepted by the EPFO. Therefore, in such cases, for implementing the directions issued earlier, formal joint option of employee and employer should not be insisted upon.
This would mean that regional offices will not mandatorily insist for joint option form of employee and employer if previously the EPF account of the concerned employee has been updated by the EPFO on the basis of the contribution received on actual salary rather than the statutory limit.
Under EPF rules, an employer has to contribute 12% of the basic salary of an employee into EPF. Out of this amount, 8.33% goes into EPS. The current salary cap on EPF is Rs15,000 a month. So, the maximum contribution to EPS is Rs1,250 a month. A 1996 amendment in the EPS Act gives employees the option to raise pension contribution to 8.33% of the actual salary (basic + DA). To hike the contribution to EPS, one has to apply to the EPFO along with a consent letter from the employer. Supreme Court, through a ruling in 2016, made it mandatory for EPFO to allow higher contribution to EPS. Even retired employees can opt for this. After a few years, EPFO even stopped accepting requests for raising the contribution to EPS.
Following several media reports, in 2005, several private EPF trustees and employees approached EPFO with the demand to remove the ceiling on their EPS contributions and raise it to their total salary. The EPFO rejected the demand claiming that their response should have come within six months of 1996 amendment. In October 2016, Supreme Court ruled in favour of employees' right to raise their contributions to the pension fund without imposing any cut-off date for eligibility.
Consequently, EPFO via a circular dated March 23, 2017, instructed its regional offices to take necessary action in accordance with the orders of SC and allow the members of Employee Pension Scheme, 1995 to get full benefit of pension on higher salary on the receipt of joint option from employer and employee. With effect from September 1, 2014, EPFO asked the existing members who were contributing on full salary to furnish a fresh option within 6-12 months. However, for those employees who were contributing on higher salary prior to the above mentioned date, in such cases as well, joint option need not to be insisted upon as per the latest circular.
From September 1, 2014, the pensionable salary limit was raised to Rs15,000 from Rs6,500. Further, EPFO stopped the contribution on full salary thereon. However, EPFO members who have opted to contribute to EPS on the basis of actual salary were required to deposit an additional contribution into the pension fund at the rate of 1.16% of salary exceeding Rs15,000, from and out of the contributions payable by the employees for each month. However, for the period prior to September 1, 2014, there is no such provision in EPS, 1995 which requires the employees who opt to deposit contribution at actual salary to deposit any additional contribution as per the circular.