The Employees Provident Fund Organisation (EPFO) on January 18th 2025, has provided essential clarifications regarding the processing of pensions on higher wages, responding to queries raised by field offices.
These clarifications, approved by the Hon’ble Minister of Labour & Employment (MoL&E), address key aspects of pension computation and eligibility, specifically for members under the Employees’ Pension Scheme (EPS-95).
Key Clarifications:
Pension Computation on a Pro-Rata Basis:
- Pro-rata pension calculation is in line with Para 12 of the EPS, ensuring fairness between pensioners under the wage ceiling and those on higher wages. The method of computation remains valid and has not been deemed unconstitutional by the Hon’ble Supreme Court. Therefore, pension on higher wages (PoHW) will continue to be calculated on a pro-rata basis.
Eligibility for PoHW in Exempted Establishments:
- For exempted establishments, eligibility for pension on higher wages will be determined based on the trust rules of the respective establishment. This follows the directions from the Hon’ble Supreme Court in the Sunil Kumar case. However, applications from members of trusts with amended rules after November 4, 2022, will not be considered for PoHW.
Netting of PoHW Dues Against Pension Arrears:
- Eligibility for PoHW is confirmed only once the dues, along with interest, have been received into the pension fund. Netting these dues against pension arrears is not appropriate, as it could lead to tax complications. Both pension arrears and higher wage pension amounts attract Tax Deducted at Source (TDS), which could create issues for the pensioner.
Reckoning Wage Arrears Payable Retrospectively:
- Retrospective revisions of wages were not a result of willful default by employers. Thus, these wages should be accounted for in the respective months for which the arrears are intended. It would be inappropriate to recover damages under Section 14-B in such cases. However, interest on dues may be recovered up to the date of the employee’s retirement or cessation of membership in EPS-95, whichever is earlier. It is emphasized that no damages will be imposed in these cases.
Conclusion
The clarifications issued by EPFO aim to ensure clarity and fairness in the processing of pension on higher wages cases, aligning with legal guidelines and simplifying the procedures for both employers and employees. The instructions also stress the importance of adhering to the EPS-95 regulations and resolving any concerns at the Regional Office level without escalating to higher authorities.
