New Delhi: The Employees' Provident Fund Organisation (EPFO) has defended the pro-rata method used to calculate higher provident fund (PF) pensions following the Supreme Court’s ruling. EPFO clarified that the Supreme Court did not deem the pro-rata method illegal. The justification overlooks the fact that the pro-rata method was not part of the Supreme Court case. The explanation comes amid ongoing concerns regarding the calculation method, which separates service periods before and after 2014.
EPFO explains pro-rata method's legality
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In a recent statement, EPFO explained that the Supreme Court's judgment did not directly address the legality of the pro-rata method for PF pension calculations. The court’s focus was on giving PF members the opportunity to transfer amounts proportional to their actual salary to the pension fund. EPFO emphasised that the pro-rata method was previously part of the Employees' Pension Scheme (EPS) and has been approved by the Union Ministry of Labour and Employment.
Criticism over pre-, post-2014 pension calculation
One of the main points of contention involves the categorisation of service periods into before and after 2014. Critics argue that this distinction is unfair, especially since the new pension scheme was implemented in September 2014. EPFO’s approach involves calculating pensions based on these separate periods, which has caused dissatisfaction among employees who feel their pensions are being reduced.
Another issue raised is the practice of giving two years of additional weightage to employees who have more than 20 years of service. This weightage, applicable only to the period before 2014, further reduces the potential pension amount. However, EPFO’s explanatory note did not address this concern.
The explanatory note clarified that amendments made to pension rules by organisations managing their own pension funds, also known as exempted trusts, will not be applicable to those seeking higher pensions based on the Supreme Court’s ruling. This means that the changes made after the Supreme Court decision will not apply to individuals aiming for higher pensions under the revised scheme.
Published: 20 Jan 2025, 08:28 am IST
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