EPFO Pensioner or Sisyphus ?

The Employees Provident Funds and Miscellaneous Provisions Act, 1952 is a piece of social security legislation whose preamble states – ‘An Act to provide for the institution of provident funds, pension fund and deposit-linked insurance fund for employees in factories and other establishments’. Social Security, the world over is taken to be an important pillar of a welfare state. According to some reports, the Employees Provident Fund Organization of India, EPFO, as it is popularly known, holds savings of 27 Crore Indians, at the end of March 2021, the total corpus of EPFO stood at ₹ 1569000 (over $209 billion). In asset size, it is  8th among all sovereign pension funds, 18th among all pension and investment funds and 33rd among all top asset owners of the world. Not a mean feat. The corpus is mainly a derivative of the employees/employers’ contributions who compulsorily need to put in part of the wages into the fund. The fund is managed at the apex level by the Central Board of Trustees (CBT). This in turn reports to the Ministry of Labour and Employment. Finance Ministry has a policy-level role and approves many crucial financial(budgetary) decisions. 

From the intent of the statute, as well as the various provisions contained therein, it’s clear that the contributing members(employees of various organizations) are the centrepiece of the enactment and procedural elements have been put in place for the smooth implementation of the contributions collected from them. As we all know procedural elements being what they are, cannot take precedence over the substantive portion of the enactment. Issues have been raised, off and on,  by many interested parties with regard to the functioning and administration of the funds. While the management of the funds have been more or less satisfactory, the administration has often been found to be wanting. EPFO’s reputation as a corruption-free organization that believes in fair handling of matters is belied by frequent headlines like:  

Kerala EPFO enforcement officer gets 3-year jail for taking bribe; CBI arrests Haryana-based EPFO’s Enforcement officer; CBI lays a trap, catches two EPFO officials in Noida taking Rs 8 lakh bribe; Mumbai: EPFO officer sentenced to 5 yrs rigorous imprisonment ..

EPFO also ranks high in the perception of Corrupt organizations finding a place amongst Income Tax Authorities, Transport Authorities, Health Authorities, Education Authorities etc.  The rather opaque system of operation of funds adds to the confusion.  Prudence dictates that social security funds should get invested in safe instruments and not in speculative, high-risk ones. EPFO rules permit for a minimal exposure to the volatile equity market. Surprisingly, EPFO has invested in Adani companies which were recently the target of short sellers and which even Indian Mutual Funds are wary of investing. Indeed, a rare show of daring by a Social Security Organization. But such daring and alacrity  is rarely shown in its interface with the members. Today’s customers’ are used to a different set of service standards as prevalent in Banks, Insurance Companies, Mutual Funds Companies etc. Compared to these the EPFO working is not very user-friendly. Ease of  doing business is more by claims than actual practice. EPFO procedures are cumbersome, vexatious and complicated. Even for a  common, periodical, repetitive matter like furnishing of  Annual  ‘Live Certificate’ is a difficult chore. The  task becomes particularly exasperating for  beneficiaries who are Old, Infirm, Senior Citizens or not e connected. The reason, readers, perhaps lies in the vision and nature of the administration of EPFO itself. If one is to go by the general perception of the beneficiaries, EPFO does not seem to have a service orientation. It tends to view any demand made upon it as uncalled for, improper and deserving the strictest of tests/proof/evidence. In most cases, EPFO adopts an adversarial position which is unbecoming of any welfare institution. One can understand, a Taxation Institution adopting such an approach but EPFO is a social security organization. The fundamental existence of EPFO is for service to the members especially when they lack a regular income and are in their trying times. Maybe the conscriptive and compulsory nature of membership is also to be blamed. Issues like the lack of a transparent approach, red tapism, multiplicity and confusing documentation have been brought out in the media. Social media is full of anxious people posting messages on vexing issues relating to EPFO. Exasperatingly, crucial matters seems to fly under the radar of public scrutiny or an ombudsmen. It is also very  surprising that over the years, EPFO has been a respondent in multiple litigations. One cannot just understand, why should a social security organization be saddled with so many court cases?  We are also unaware of any attempts made by concerned authorities in settling the matters out of court. One fails to understand why the employees/ ex employees  and EPFO can’t see eye to eye.  The opacity and lack of public discourse seems to indicate a deeper malaise. 

The latest episode involving EPFO is the judgment dated 04.11.2022  passed by the Hon’ble Supreme Court providing for a one-time opportunity for eligible employees to opt for higher pension from Employees’ Pension Scheme (EPS). The judgment was passed in THE EMPLOYEES PROVIDENT FUND ORGANISATION & ANR. ETC… APPELLANT(S) VERSUS SUNIL KUMAR B. & ORS. ETC…RESPONDENTS. The case has had a chequered history. It came before the Apex Court as an appeal by the EPFO in respect of several cases filed against it. We are sure by now, many have a good  acquaintance with the case but a correct perspective is required before conclusions can be drawn. Essentially, the apex court decided to deal with the legality of certain amendments and modifications made by the Central Government to the  Employees’ Pension Scheme, 1995. Paragraph11 of the scheme dealt with determination of  pensionable salary.  At a point of time, maximum pensionable salary was Rs.5000/, this sum was   enhanced to Rs.6500/ and  then to   Rs.15000/   by   a notification   dated   22nd  August   2014   which was to be effective from 1st September 2014. This notification brought certain other modifications in the scheme  mainly restricting its coverage. Fifty four   Writ   Petitions  were  filed   by   the   employees        themselves or on their behalf under  seeking invalidation of the notification dated 22nd August 2014.The writ petitioners were members of both  exempted and un exempted establishments under EPFO. Kerala High Court having also dealt with the notification; the Hon’ble Supreme Court decided to address mainly the Kerala High Court Judgment, especially Paragraphs 37 and 38 of the Kerala High Court judgment. Para 37 discussed that the stated objective of the amendments was to prevent depletion of the fund while Para 38 dealt with different classes made on the basis of the date, 1.9.2014. To cut a long story short , the Hon’ble Supreme Court ruled in favour of the member employees/retired employees. It allowed for payment of increased Pension in accordance with the guidelines laid down and ruled that the Judgment must be complied with within a period of four months. It was to apply to both exempted and non exempted establishments. The Court also stated that in order to be entitled to the benefits of the pension fund, the employer and the employee, simultaneously have to exercise option. Once such joint option is exercised, the transfer of fund from the provident fund corpus to the pension fund shall be effected in terms of the scheme. The Hon’ble  Court accordingly held and directed: The provisions contained in the notification no. G.S.R.609(E) dated 22nd August 2014 were legal and valid. Further, the  employees  who  had  exercised  option  under  the proviso to paragraph 11(3) of the 1995 scheme and continued to be in service as on 1st  September 2014, would be  guided by the amended provisions of paragraph 11(4) of the pension scheme.  The   members   of   the   scheme,   who   did   not   exercise option, as contemplated in the proviso to paragraph11(3) of the pension scheme (as it was before  the 2014Amendment) would be entitled to exercise option under paragraph 11(4) of the post  amendment scheme.  Their right   to   exercise   option   before   1st  September   2014 stood crystallized in the judgment  in the case of  R.C.  Gupta.  The scheme as it stood before 1 st September  2014    did not provide  for any cutoff date  and thus those members should be entitled to exercise   option   in   terms   of   paragraph11(4)   of   the scheme, as   it   stands   at   present. Their   exercise   of option shall  be in  the nature of joint options covering pre amended   paragraph   11(3)   as   also   the   amended paragraph 11(4) of the pension scheme. Thus, all the employees who did not exercise option but were entitled to do so but could not, due to the interpretation on cutoff date by the authorities, ought to be given afurtherchance to exercise their option. Time to  exercise option  under paragraph 11(4) of the scheme, under these circumstances, shall stand extended by a further priod of four months. 

The employees who had retired prior to 1st September2014 without exercising any option under  paragraph 11(3)   of   the   pre amendment   scheme   having   already exited from the membership thereof. They would not be entitled to the benefit of this judgment.


Esteem Readers may kindly note that the above paras do not purport to represent the full text or accurate depiction of the judgment. It is suggested that the readers may kindly refer the text of original citation for authenticity and  complete understanding. 

After the pronouncement of judgment by the apex court, the Labour Minister, Bhupender Yadav was very positive during interaction with the media on  December 2022. When asked  about the approach to both the issues of  Social Security Code as well as the judgment,  the Hon’ble  Minister said that Consultations and consensus-building is an intrinsic part of cooperative federalism. The Code on Social Security, 2020, received the assent of the President of India on September 28, 2020 and shall come into force on such date/dates, as may be decided. Regarding the second part of the question, he said, the case was mainly about the constitutional validity of the 2014 amendments made to the pension scheme. He went on to say that the judgment of the Supreme court was being examined. It had legal, financial, actuarial and logistical implications. The interests of the employees that have been contributing to the pension fund below and above the wage ceiling will have to be safeguarded. The Government of India is committed to providing a sustainable and adequate pension to all the employees that are members of the Employees’ Pension Scheme, 1995. 

However, the reaction and more importantly the conduct of EPFO post the judgment was on predictable lines. The whole ecosystem seemed to gear up to obfuscate the implementation process. Most beneficiaries do understand that  the implementation of the Judgment is not easy. But the moot question is,  why does the ecosystem always seem to be part of the problem and not solution? The beneficiaries amongst other things are required to submit an irrevocable,  joint undertaking/ declaration, along with the employer/ex employer  for raising claims for increased pension. Most employers in order to protect their backs have deigned to draft the joint undertaking/ declaration in a manner that is one sided and onerous. Many employers have stated that the undertaking/declaration has to be in form of a sworn affidavit, maybe even  notarized. With clauses like ” I agree and  acknowledge that I will not be able to withdraw or modify my option once exercised unless otherwise permitted by the EPFO…….. and I will be bound by the terms of the EPS-95 as may be notified/modified/ communicated by the EPFO from time to time.” ….” I hereby undertake and agree to make payment of the due contribution along with interest and any other charges, up to the date of payment, as and when and in the manner sought by EPFO.”….” I agree that (name of the company) shall be entitled to initiate appropriate proceedings as deemed fit in case of non adherence to any action by me in respect of any of the above mentioned conditions/ paras.” Several issues arise out of such a  draft undertaking/declaration. It does not mention what the employers liability would be in case of any breach/ failure at the employers end. Further, the irrevocability  clause forecloses any  exercise of right to future changes  or even force majeure.  Interestingly, there is no mention of amounts to be deposited nor quantum of increased monthly pension. Such an open ended undertaking may not be valid in law. There is no proper delineation of the consideration, specifics regarding individual calculations are totally missing. There is no reference of actual amount to be deposited, pension amount payable, nothing about calculation of  interests. If you were to think that details would be available in the EPFO site you are grossly mistaken. No mention is made of amounts, interest dates and if the interest is to be uniform or vary with certain anchor dates, actual increased pension payable by FPFO to an individual,  particular band of individuals, methodology of calculation etc. Another  crucial question on every incumbent’s mind is- How the ‘arrears’ of the increased monthly pension to be treated? Are the  arrears going to be paid upfront by EPFO to beneficiaries, or adjusted against  the differential amount payable by  the beneficiaries to EPFO? Or will the amount  be kept by the EPFO as part of the Corpus which will earn profits to be ploughed back or otherwise. In case of death of the beneficiary normally only 50% of the Pension is payable to the spouse. What will happen to  the remaining  money  paid up to EPFO by a dead  beneficiary ? If arrears are paid upfront the beneficiary’s dependents  will not stand to lose, else the  increased amount is liable to get forfeited, merged with the overall corpus.   These are some of the essential facts required for making an informed call. Without these facts being provided either by the EPFO or the Employers, the call up notice for joint declaration and later payment due to EPFO is incomplete and therefore not valid in law. With the last date of exercising the  option fast approaching, the  mandatory joint Undertaking/ Declaration would suffers from fatal irregularities. It can be seen as an one sided, even intimidatory communication, which  cannot be acted upon. Therefore, the  option is no option at all.  

The court judgment, by implication has provided the  beneficiaries,  a vested right. This right goes with the right to know both under the common law and contract law full facts before any option for increased pension can be made. The position  today is  fraught with ominous consequences for  claimants. Who knows maybe its intentional.  Lots of brouhaha is  made about the sustainability of the EPFO scheme in light of the judgment. There is a  sudden desire of EPFO to approach actuaries now. But what  was the EPFO doing all this while as it was a party to the dispute which could go against them which it ultimately was by the Hon’ble Supreme Court ? Why even a  budgetary provision not contemplated? After all, the matter was hanging fire before the courts for quite some time. The Labour Ministry told a Parliamentary Panel recently that its budget estimates for FY 23 – 24 had been prepared without factoring in implications of the Supreme Court Judgment of 04.11.2022. Pray Why ? Was it arrogance ? Sheer confidence of winning the Case ? Naivety of modern day finance ? It defies all logic. Could the lack of budgetary support/ or a belated appeal for it by the Ministry of Labour to the Finance Ministry explain the tardiness being shown today ? There are more questions than answers. Normally,  Corporates make provisions for any adverse impact arising out of court cases having financial implications. As per the Accounting Standards AS 29 – Provisions;  Contingent Liabilities and Contingent Assets need to be made. Most organizations  take a note of  court cases involving financial burden as a contingent liability. Of course EPFO is not a Company and is managed by a trust but good management practices dictate them to similar action.  It seems that   having lost the case, shelter is now being sought under claims of  lack of funds, cloak of secrecy, uncertainty of future payments etc.  All this is sufficient to intimidate the already hapless, aged, confused beneficiaries. Till date, the figures of those who have applied for the increased pension is not readily available, it can be assumed that there are many who are sitting of the fence due to lack of availability of these figures.  The Supreme Court judgment had came as a god send for the miserable pensioners under the EPFO scheme. They get far less pension than those similarly placed  in Central/ State Governments/Railway, Banks etc. most of which are linked to DA thus inflation protected. This is not the case with EPFO pension.. A retired Director who may have sat  on the Board of a profitable PSU,  today gets less than Rs 2500/ – a month as pension from EPSO. By no standards can this be termed an honorable pension. The aged pensioners, many of whom get a  paltry sum of pension may have dreamt of getting upwards of estimated Rs 15,000 to Rs 30,000 a month a much respectable amount.  They are now confronted with the daunting reality of paying upwards of Rs 20 Lakhs to 40 Lakhs upfront before they can even make any claim for increased pension,  let alone get it.  These figures are in turn based on guess estimates which some companies have chosen to put forth to their employees. The problem is confounded by the fact that no one is informing them the actuals. By the  own off line admission of employers, figures could go wildly wrong as the formula to arrive at them is evasive. All there is, is  a lot of wholly talk of future possibilities. EPFO is mum on these issues. One can imagine how difficult it is for the poor pensioners to wrap their heads around the whole issue. 

Coming to the non financial/ administrative side of EPFO, its working has definitely improved. Digitization has been made in a big way. However there are major glitches which exist. There appear to be multiple sites with different IP Addresses which cause confusion. The Capcha system the sites use as a primary security check is not user friendly. Many times the OTP required as a secondary security check is not received. The Help lines mostly do not function. Then the main hindrance is of linking PAN, AADHAR with UAN Number. Most of those who have retired  a while earlier, face the problem of  the UAN not being linked to AADHAR, PAN etc. . Even when it shows KYC is linked, the Site does not allow opting for Higher Pension and a cryptic message that no information is available against UAN is flashed.  Its possibly because the Bank where the Pension is to be received is not linked. Though one fails to understand how this happens,  since the person is currently  getting his/her existing  pension in that very bank. This last  matter is of a very serious concern. Without further access to the on line system of EPFO,  no retired person can exercise his choice, nor submit required documents.  Employers state that some data sent by them may have been uploaded at EPFO partially but  many pensioners for some reason are getting this particular error message. The  No information is available against UAN; has become the latest bane. This matter is  particularly important  for those who are willing  to apply for increased pension and upload their documents including Joint Option of employer and member. Since they cannot do so due to the EPFO site not permitting them to even generate the PIN and carry out the necessary set of  formalities their levels of anxiety is increasing. The last date of exercising option for increased pension is fast approaching and EPFO does not appear to be in mission mode yet. Some employers, admit in private and off record that they have re sent necessary documents for linking UAN etc. to concerned EPFO office regarding  those facing this  problem but the progress on EPSO side is dismal.  

Readers may have observed that Pension and such like Schemes  introduced with much fanfare appear rewarding but somewhere down the line, either the corpus becomes too attractive for its own good and siphoning takes place or it dies a quiet death. The forthcoming 2024 polls also may not have an impact as the pensioners do not make for a sizeable vote bank. The latter is further proven by the reported breaking news that Finance Ministry is setting up a committee to review the pension system of government employees.  Most  EPFO pensioners feel betrayed and stand forlorn today.  They can only seek solace in Martin Luther King Jr.’s words : We must accept finite disappointment, but never lose infinite hope.

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