Higher pensions: Will employees finally get relief as courts challenge EPFO method?

New Delhi: When the Supreme Court ruled on higher EPF pension based on actual salary, those who believed the years-long legal battle had finally ended were mistaken, as the dispute has continued despite the verdict. Even after the Supreme Court judgment dated 4 November 2022, legal proceedings have stretched on for three and a half years and are not expected to conclude in the near future.

At present, hundreds of cases remain pending in various High Courts, including Kerala, all relating to the issue of higher EPF pension. In Kerala, most petitions seek the benefit of the RC Gupta judgment, which held that no time limit can be imposed for exercising the option. Alongside this, separate challenges are also pending against the pro-rata method, which reduces pension amounts, as well as against rules governing exempted trusts that oppose the exercise of option.  

In judicial findings so far, it has already been held by two High Courts that the pro-rata method undermines the essence of the Supreme Court judgment, which enables higher pension based on contributions linked to actual salary for EPF members. Under the standard framework, pension calculation normally considers the average salary of the last 60 months of service. However, under the disputed pro-rata method, service is instead divided into pre- and post-1 September 2014 periods, which results in a significant reduction in pension benefits.

More recently, a strong judgment was delivered by the Punjab and Haryana High Court against the pro-rata method. In that ruling, the High Court quashed an EPFO email and circular that had mandated the pro-rata approach. It also directed payment of arrears with 8 per cent interest, while further stating that the benefit would extend even to those who had not filed petitions.

However, the Employees’ Provident Fund Organisation (EPFO) is expected to appeal against the ruling, keeping the matter legally unsettled. The Central Board of Trustees has already decided to support the pro-rata method and oppose the RC Gupta judgment. It may be noted that most cases linked to the 2016 RC Gupta ruling, which enabled higher pension for those who retired without submitting options before 1 September 2014, are pending before the Kerala High Court. As a result, it has also been decided to deploy the same lawyers appearing for EPFO in the Supreme Court to represent the organisation in the Kerala High Court.