Friday, September 17EPS 95, EPFO, JOB NEWS

EPS 95 Pension Fund Position After Allowing Pension on Actual Salary to EPS 95 Pensioner

The Employees’ Pension Scheme, 1995 (EPS) came into effect on 16th November, 1995 and with its introduction the erstwhile Employees’ Family Pension Scheme, 1971 (EFPS) ceased to operate and all the assets and liabilities of the old scheme were transferred and merged with the Employees’ Pension Fund.

With the increase in the number of members, the Fund has not witnessed any cash flow problems  since inception (1995), in spite of there being a projected actuarial deficit in the valuation of the Fund.he EPS-95 fund increases every year by the contributions received and interest earned.

Every year, there is a surplus of Income and at the end of the Financial Year 2018-19, there was an accumulated surplus of Rs. 1,04,918.44 crore. This surplus was tactically, rather cleverly, reported as negative to show a cloudy picture with the help of the Actuary, who is bound to report as such by which pensions benefits can be curtailed. By showing negative surplus, the GOI trying to go to the extent to nullifying sarcasm to the Supreme Court Judgment dated 04.10.2016 in the case of “R.C. Gupta & others” v/s “RPFC & others” which allowed pension on actual salary after getting corresponding contribution along with interest w.e.f. 16-11-1995 into the EPS Fund. It is more than 4 years the Supreme court gave a decision in favour of poor pensioners and GOI on one plea or other is trying to avoid honouring it.

Can anyone imagine a scheme wherein the average payments are made out of 51% of interest amount only, not even a single paisa is paid out of contribution and the valuation still shows negative.

EPFO providing different data at different places in order to confuse the courts. It is a deliberate attempt of EPFO to project more & more Financial Impact on account of pension on actual salary.

Even the GOI has changed the definition of unclaimed account and amount lying in Inoperative account (formerly known as Unclaimed Deposit Account) has been transferred to operative member accounts. It may be noted that it was informed in the parliament that transferred amount Rs. 52,919.80 crore will be used for the pensioners of EPS’95 but not a single paisa is used.

As per actuarial report the sample data provided are much less and it may not be representative, it is excluding the expected / recoverable past PF contribution based on applicable higher wages with interest, calculated for current active members. The Liability is exclusive of the PF balance being transferred to the Pension Fund; the net liability shall get reduced by the additional corpus transferred from the PF balance. 

It appears that EPS’95 is not a social security scheme but a fund-raising scheme sponsored by GOI through EPFO. No doubt the fund will go out of control not because of diminishing fund but due to flood of funds in the form of differential amount, additional contribution from working employees and interest to be earned on it.

2. Double Standards for EPS’95 pensioners

a) EPFO’s advertisement dt 05-01-1996 “Employees Pension Scheme 1995 – Clarifications” released after the introduction of Employees Pension Scheme. (In answer to question at Point no.5, EPFO has clarified that “The Pensionary benefits on retirement under the new pension scheme are more than those enjoyed by the Govt employees”) (A1_Clarifications on EPS-1995 by EPFO – The Tribune)

b) Oil India Ltd. is one of the only TWO establishments which are EXEMPTED for EPF as well as EPS.

Here, the Attorney General of India has opined that even the separated employees can exercise the option to contribute to the Pension Fund on the basis of their actual salary. But in case of Exempted for EPF & Unexempted for EPS and for Unexempted for EPF as well as for EPS, his views are different.

“Resolved that in view of the opinion of the Attorney General of India and the judgement of the Supreme Court of India on the subject, approval of the Board be and is hereby accorded to extend opportunity to the Employees of the Company (including separated Employees) to exercise the Option to Contribute to the “Oil India Employees’ Pension Fund” on the basis of their actual salary.” (A2_Opinion of Attorney General on separated employees of Oil India Ltd).

3. Employees’ Pension Fund

a) Receipt – Contribution only (Rs. in crore) (A3_Receipt – Contribution only) The receipts into the corpus of the pension fund since inception is shown below in the table.

The contributions of the EPS have grown steadily and since beginning average increase in contribution is 16.8%.

b) Payments from Surplus of Income (Rs. in crore)

At the end of the Financial Year 2018-19, there was an accumulated surplus of Rs. 1,04,918.44 crore.

Average payments are made out of 51% of interest amount only.

c) Pension Fund Corpus (Rs. in crore)

d) Inoperative accounts of PF (Rs. in crore) (A6_Inoperative accounts of PF) Amount of Inoperative account has reduced from Rs. 54,657.87 crore as on 31-03-2018 to Rs. 1,638.37 crore as on 31-03-2019. (A7_Inoperative accounts of PF with analysis).

In reply to question number 240 in Lok Sabha, on 18.12.2017, MoL&E had informed that the corpus in the inoperative account as identified in the Finance Act 2015 to be transferred to Senior Citizens Welfare Fund will be used for the pensioners of EPS-95. (A8_Question and Answer on Inoperative amount in Lok Sabha).

Amount transferred to Operative Members account during the year 2018-19 is Rs. 52,919.80 crore. As per RTI reply no amount has been transferred or spent on any welfare scheme by EPFO so far.

4. Members and Pensioners (A14_UOI vs Sunil Kumar Additional IA)

a) Members as per actuarial report:

“We were provided with a sample usable data for 5,32,974 and the same was extrapolated to 92,55,580. This extrapolation may give a skewed result as the sample data is much less and it may not be representative. If the sample data to be considered representative then the liability for the exempted establishments will work out to Net Liability Rs. 8,73,263.75 crore, it is excluding the expected / recoverable past PF contribution based on applicable higher wages with interest, calculated for current active members only and some part of the liability may be included as unexempt member of EPS.
Net Liability of Rs. 5,75,918.88 crore [interpretation is that the all will opt for higher salary pension.

4. Members and Pensioners (A14_UOI vs Sunil Kumar Additional IA)

a) Members as per actuarial report:

“We
were provided with a sample usable data for 5,32,974 and the same was
extrapolated to 92,55,580. This extrapolation may give a skewed result
as the sample data is much less and it may not be representative. If the
sample data to be considered representative then the liability for the
exempted establishments will work out to Net Liability Rs. 8,73,263.75
crore, it is excluding the expected / recoverable past PF contribution
based on applicable higher wages with interest, calculated for current
active members only and some part of the liability may be included as
unexempt member of EPS.

Net Liability of Rs. 5,75,918.88 crore
[interpretation is that the all will opt for higher salary pension and
no extra benefit will be given to pensioners].

The
Liability is exclusive of the PF balance being transferred to the
Pension Fund; the net liability shall get reduced by the additional
corpus transferred from the PF balance.”

Above results are calculated based on below table of members data:

n and no extra benefit will be given to pensioners].

The Liability is exclusive of the PF balance being transferred to the Pension Fund; the net liability shall get reduced by the additional corpus transferred from the PF balance.”

Above results are calculated based on below table of members data:

b) Analysis of members

i. Categorization of Total members: Interpretation is that the all will opt for higher salary pension, EPFO HAS NOWHERE DEFINED WHO ARE THOSE – ALL?

Out of above members following members (97.7%) are NOT ELIGIBLE for pension on actual salary as either they have gone for withdrawal benefits or family pensioners or have not contributed on actual salary.

(i) Withdrawal Beneficiaries (10,98,78,509 members)
(ii) Scheme Certificate (3,66,26,170 members)
(iii) Family Pensioners & Child (17,74,462 members)
(iv) Active-Others, below 15k ceiling (4,06,48,849 members)

c) Pensioners getting pension on actual salary

In latest affidavit, given on 16-01-2021, for 15,628 pensioners EPFO paid a net amount of Rs. 839.76 crore more. The data is very old & not true. (A15_UOI vs Sunil Kumar Stay application)

As per RTI reply dt 10-03-2020, number of pensioners getting pension on actual salary are 24,672. And for these pensioners EPFO paid additional amount of Rs. 22.46 crore only. (A10_No of pensioners getting pension on actual salary with Analysis)

Latest compiled data available upto 17-01-2020. Which is very surprising as EPFO has not updated the pensioners data for last one year. (A11_No of pensioners getting pension on actual salary dt 21-01-2021)

i. Data of 24,672 Pensioners (A12_No of pensioners getting pension on actual salary dt 17-01-2020)

5. Financial Liability or Gold Mine (A9_MoL&E correspondence)

a) On Government of India: “EPFO had informed that the there is no financial liability on the part of GOI in this matter as GOl’s contribution of 1.16 per cent of wages under EPS, 1995 is restricted to the wage ceiling”

b) On EPFO

  • i. Regarding the financial liability involved in implementing the proposal, EPFO has stated that the financial liability in implementing the Hon’ble Supreme Court order will be met from the Pension Fund.
  • ii. GOI is estimated to spend Rs 34,83,236 crore during 2021-22 and EPFO calculating liability on account of pension on actual salary as Rs. 15,28,519.47 crore (44% of budget), which seems to be impractical.
  • iii. It is very surprising that the proposal of providing pension on actual salary was prepared by EPFO and duly approved by MoL&E and then by MoF and all of sudden within a period of 2 months EPFO issued another circular dt 31-05-2017 depriving the benefit to exempted establishment without seeking any approval from competent authority i.e., CBT/MoL&E.

c) Proposed Financial liability of eligible pensioners on actual salary Eligible Members out of 38,75,335 Pensioners: categorization of these members have been done on the basis of RTI reply for 38,83,307 pensioners (as per available data)

(i) Eligible pensioners (A13_ EPS95 Pensioners)

e) Conclusion: As per above estimate immediately after implementing pension on actual salary

(i) EPFO to pay 10,07,091 member pensioners (0.52 % of total members)
− Rs. 916.96 crore, one time
− Rs. 5,232.84 crore (will be static and not increase every year)

Amount to member pensioners can be easily paid from surplus income of Rs. 14,035.37 crore of 2018-19 only, without any additional liability on EPFO.

(ii) EPFO corpus to enrich in funds from 5,88,535 working employees (0.30 % of total members)
+ Rs. 17,261.73 crore, one time
+ Rs. 588.30 crore additional contribution (will increase every year) &
+ Rs. 1,517.25 crore interest (will increase every year)

6. List of Annexures:

Information Prepared by: Neeraj Bhargava in consultation with Mr. Parveen Kohli for EPS 95 Pensioners information and references. 

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