Editor's Pick: SC allows current employees to join pension scheme

The Supreme Court on Friday upheld the Employees’ Pension (Amendment) Scheme, 2014 of the Employees’ Provident Fund Organistion as “legal and valid” while reading down certain provisions. Most important, the court used its extraordinary powers under Article 142 of the Constitution to allow eligible employees who had not opted for enhanced pension coverage prior to the 2014 amendments, to jointly do so with their employers within the next four months. The court struck down a requirement in the 2014 amendments that employees who go beyond the salary threshold (of ₹15,000 per month) should contribute monthly to the pension scheme at the rate of 1.16% of their salary. The requirement to contribute 1.16% of the salary to the extent that such salary exceeds ₹15,000 per month as an additional contribution made under the amendment scheme is held to be ultra vires to the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, a three-judge Bench led by Chief Justice U.U. Lalit held. The court suspended the implementation of this part for six months. “We suspend the operation of this part of our order for six months. We do so to enable the authorities to make adjustments in the scheme so that the additional contribution can be generated from other legitimate sources within the scope of the Act, which could include enhancing the rate of contribution of the employers,” the judgment said. The court held that the amendments to the pension scheme notified on August 22, 2014, would apply to the employees of “exempted establishments” in the list of the Employees’ Provident Fund Organisation (EPFO), which number over 1,300 companies and entities, in the same manner as for the staff of regular establishments. The legal dispute primarily concerned the controversial amendments made to clause 11 of the EPS-1995. The 51-page verdict, authored by Justice Aniruddha Bose, came in an appeal filed by the EPFO challenging the decisions of the Kerala, Rajasthan and Delhi High Courts quashing the 2014 amendments on “determination of pensionable salary” under the Employees Pension Scheme (EPS) of 1995. Before the amendments were introduced, every employee, who became a member of the Employees Provident Fund Scheme of 1952 as on November 16, 1995, could avail the EPS. In the pre-amended version of EPS-1995, the maximum pensionable salary was ₹6,500. However, members whose salaries exceeded this cap could also opt, along with employers, to contribute up to 8.33% of their actual salaries to the pension fund. The 2014 amendments to the EPS, which included changes in Clause 11(3) and insertion of paragraph 11(4), raised the cap from ₹6,500 to ₹15,000. Paragraph 11(4) said only employees, who were existing EPS members as on September 1, 2014, could continue to contribute to the pension fund in accordance with their actual salaries. They were given a window of six months to opt for the new pension regime. However, the court removed the cut-off date in the 2014 amendments. Employees who retired prior to September 1, 2014, without exercising any option would not be entitled to benefit of this judgment. The Union Labour Ministry, the EPFO and organisations of employees and employers are studying the Supreme Court order. Sources in the Labour Ministry said it would come up with detailed guidelines for staff and employees on implementing the verdict. Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor‘s Pick and more. Click here The Hindu’s Editorials Remote voting: On postal ballot for NRIs Hazy signals: On missing points in October GST data The Hindu’s Daily News Quiz Who is playing Ravana in Om Raut’s Adipurush, a retelling of the Ramayana? Saif Ali Khan Hrithik Roshan Nawazuddin Siddiqui Rana Daggubati To know the answer and to take the quiz, click here. [logo] Editor's Pick 05 NOVEMBER 2022 [The Hindu logo] In the Editor's Pick newsletter, The Hindu explains why a story was important enough to be carried on the front page of today's edition of our newspaper. [Arrow]( [Open in browser]( [Mail icon]( [More newsletters]( SC allows current employees to join pension scheme The Supreme Court on Friday [upheld]( the Employees’ Pension (Amendment) Scheme, 2014 of the Employees’ Provident Fund Organistion as “legal and valid” while reading down certain provisions. Most important, the court used its extraordinary powers under Article 142 of the Constitution to allow eligible employees who had not opted for enhanced pension coverage prior to the 2014 amendments, to jointly do so with their employers within the next four months. The court struck down a requirement in the 2014 amendments that employees who go beyond the salary threshold (of ₹15,000 per month) should contribute monthly to the pension scheme at the rate of 1.16% of their salary. The requirement to contribute 1.16% of the salary to the extent that such salary exceeds ₹15,000 per month as an additional contribution made under the amendment scheme is held to be ultra vires to the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, a three-judge Bench led by Chief Justice U.U. Lalit held. The court suspended the implementation of this part for six months. “We suspend the operation of this part of our order for six months. We do so to enable the authorities to make adjustments in the scheme so that the additional contribution can be generated from other legitimate sources within the scope of the Act, which could include enhancing the rate of contribution of the employers,” the judgment said. The court held that the amendments to the pension scheme notified on August 22, 2014, would apply to the employees of “exempted establishments” in the list of the Employees’ Provident Fund Organisation (EPFO), which number over 1,300 companies and entities, in the same manner as for the staff of regular establishments. The legal dispute primarily concerned the controversial amendments made to clause 11 of the EPS-1995. The 51-page verdict, authored by Justice Aniruddha Bose, came in an appeal filed by the EPFO challenging the decisions of the Kerala, Rajasthan and Delhi High Courts quashing the 2014 amendments on “determination of pensionable salary” under the Employees Pension Scheme (EPS) of 1995. Before the amendments were introduced, every employee, who became a member of the Employees Provident Fund Scheme of 1952 as on November 16, 1995, could avail the EPS. In the pre-amended version of EPS-1995, the maximum pensionable salary was ₹6,500. However, members whose salaries exceeded this cap could also opt, along with employers, to contribute up to 8.33% of their actual salaries to the pension fund. The 2014 amendments to the EPS, which included changes in Clause 11(3) and insertion of paragraph 11(4), raised the cap from ₹6,500 to ₹15,000. Paragraph 11(4) said only employees, who were existing EPS members as on September 1, 2014, could continue to contribute to the pension fund in accordance with their actual salaries. They were given a window of six months to opt for the new pension regime. However, the court removed the cut-off date in the 2014 amendments. Employees who retired prior to September 1, 2014, without exercising any option would not be entitled to benefit of this judgment. The Union Labour Ministry, the EPFO and organisations of employees and employers are studying the Supreme Court order. Sources in the Labour Ministry said it would [come up with detailed guidelines]( for staff and employees on implementing the verdict. Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor‘s Pick and more. 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