Higher Pension: Calcutta HC strikes down EPFO’s pro-rata calculation method

New Delhi: In a major setback to the Employees' Provident Fund Organisation (EPFO), the Calcutta High Court has declared the “pro-rata” method used to reduce higher pension payouts unlawful. Despite three separate High Courts now ruling against the practice, immediate relief continues to elude EPF pensioners as the trust persistently challenges these verdicts.

The Calcutta High Court quashed the EPFO's circular dated February 14, 2024, which mandated the pro-rata computation method for calculating higher pensions. The verdict came on a petition filed by the Sabdarnagar Education and Welfare Society.

Under established rules, higher pension amounts ought to be calculated based on the average salary drawn over the final 60 months of service.

However, under the EPFO’s pro-rata system, an employee’s service period is split into two distinct segments – prior to and following September 1, 2014. This artificial division drastically reduces the final pension payable to eligible retirees.

The Calcutta High Court's ruling marks the third judicial rejection of the pro-rata mechanism. Last year, the Himachal Pradesh High Court ruled the method unfair, though the EPFO obtained a stay from a Division Bench upon filing an appeal. On May 27, the Punjab and Haryana High Court similarly quashed the pro-rata system, but the EPFO challenged that decision as well.

Pensioner groups express frustration that despite repeated judicial reprimands calling the formula illegal and arbitrary, the EPFO continues to defend the pro-rata policy through appeals rather than disbursing full entitlements.