HIGHLIGHTS OF SUPREME COURT ORDER DT.

04-11-2022 ON EPS-95
Dated: 05th November, 2022

Three judges bench of Hon’ble Supreme Court of India comprising Chief Justice of India Shri U
U Lalit, Justice Shri Aniruddha Bose and Justice Shri Sudhansu Dhulia gave a very important
judgement about EPS-95 scheme on 04-11-2022, in the SLP filed by EPFO regarding
amendments in the EPS-95 scheme vide notification no: G.S.R. 609(E) dated 22 nd August
2014 w.r.t increase in wage limit, calculation of pensionable salary and time limit for
submission of joint declaration for contribution on actual salary. Various High Court such as
Kerala High Court, Delhi High Court had passed order in favour of the members of the EPS-95
Scheme.

Based on my understating, important points of the judgement are listed below for the
benefits of the members/employees who are covered under EPF-1952 Scheme/EPS-95
Scheme:

1. Supreme Court held that amendments in the EPS-95, which is effective from 01-09-
2014, are valid and legal. This means that any person joining service at initial salary of
more than Rs.15000.00 are not eligible for membership of EPS-95 Scheme. There were
few other amendments like change in the method of calculation of “Pensionable
Salary” and time limit to opt for contribution on actual salary which has been dealt in the
subsequent paragraph.

2. SC did not find any flaw in altering the basis for computation of Pensionable
Salary. Calculation of Pensionable Salary shall be as per the amended scheme i.e.
in proportion to the salary as applicable from time to time during the contributory
period (in place of earlier provision of average of last 12 months salary). Pensionable
Salary shall be computed on the basis of actual salary on which contribution is
remitted/will be remitted now during the membership of the scheme i.e. from 16-11-
1995/date of joining, whichever is later till the date of attaining the age of vesting of
benefits i.e. 58 yrs. This means “Pensionable Salary” shall be calculated on the
basis of Salary on which contribution has been remitted/will be remitted now to
EPFO (from 16-11-1995 or date of joining service, whichever is later) from time to
time and not on the salary as on the date of attaining 58 years or the salary of
previous 12 months or 60 months preceding the attainments of age of 58 years. In
case of PSU employees, salary means Basic Pay + Dearness allowance.

This order is to the disadvantage of the employees because in the un-amended

scheme average salary of last 12 months were considered as Pensionable Salary
and higher pension was receivable.

3. Employees of the Exempted Establishment (organization that has its own PF Trust
but EPS-95 contribution is remitted to EPFO) shall be treated at par with employee
of the unexampled/regular establishment (organization that remit both PF and
EPS-95 contribution to EPFO). SC judgement in R.C. Gupta case shall also be
applicable to the employees of the exempted establishment and no discrimination can be
made between two classes of employees/members of the EPS-95. This means that
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 employees of the exempted establishment shall also be eligible to exercise the option
under para: 11(4) of the EPS-95 scheme and submit joint declaration (within four months)
for paying contribution on actual salary and payment of pension on actual pensionable
Salary.

This is a major relief to the employees of the PSU/large Corporates, which has its
own PF Trust and were hitherto denied the right to submit joint declaration even
after judgment in the R C Gupta case.

4. In case of employees who were Members of the EPS-95 scheme as on 01-09-

2014, four (4) months’ time have been given from 04-11-2022 to submit joint
declaration under para-11(4) of the amended EPS-95 Scheme: A joint declaration is
to be submitted within four months by employee and his employer to opt for EPS-95
contribution on actual salary for getting higher pension.

This is a very important judgement and main crux of the judgement. If anyone
wants to contribute on actual salary for payment of pension on such Pensionable
Salary, then SC under its power under article 142 of the Constitution of India has
given four months’ time to opt for the same. This would be the last opportunity to
opt for higher pension under EPS-95. Cutoff date is 01-09-2014, accordingly, all
employees who were member of the EPS-95 Scheme i.e., were below the age of 58
years as on 01-09-2014 and are in service now or may have retired(separated) shall
be eligible for submission of option/joint declaration under para: 11(4) to
contribute on actual salary for higher pension on Pensionable Salary as defined in
the amended EPS-95 Scheme. Contribution on actual salary shall be payable from
the date of start of membership of the Scheme (16-11-1995 or date of joining PF
membership, whichever is later) to EPFO with interest at the rate, as declared by
EPFO from time to time for PF.

5. In case of employee of Exempted Establishment, it has to be certified in the joint declaration

that due contributions along with applicable interest shall be remitted by the employer/PF Trust
by diverting the same from employee PF account within the time line as may be
prescribed by EPFO in this regard. In case of employees of un-exempted establishment,
transfer of funds from PF account to EPS-95 account shall be made by the EPFO
themselves based on the joint declaration.

6. Employees who have retired prior to 01-09-2014 without exercising any option
under un-amended EPS-95 pension scheme, under para: 11(3) of the schemes,
shall not be eligible to exercise any option now. However, if such employee had
exercised the option before retirement, then he/she shall be eligible for pension on actual
salary on payment of due contribution with interest. Also, the employees who had
exercised their option under para:11(3) of the scheme prior to 01-09-2014 and were in
service as on 01-09-2014 shall be guided by the amended para: 11(4) i.e., they shall have
to submit fresh joint declaration within four months’ time to opt for contribution on actual
salary to draw pension on such salary.

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This is a set back to the employees who had retired prior to 01-09-2014 and were
fighting the case in the hope that they would also get the option to opt for higher
pension by paying contribution on actual salary because EPFO was not accepting the
option prior to 01-09-2014 and even after R C Gupta case, employees of the exempted
establishment were not allowed by the EPFO to submit the option/joint declaration.

7. SC held that amendments in the EPS-95 scheme w.r.t. payment of additional

contribution @1.16% by employee over & above prescribed contribution @8.33%
of salary, is ultra vires i.e., not within the power of the EPFO. There is no such
provision in the EPF&MP Act, 1952. However, this p a r t of the judgement shall be
suspended for six months. Court ordered that EPFO/Govt. should find alternative way to
generate additional resources in a legitimate way.

8. However, for the period of six month or till such time any amendments in the Act are
made, whichever is earlier, employee may be asked to contribute additional contribution
@ 1.16% of their salary as a stop gap measure to generate additional resources for the
Scheme. However, this shall be adjustable on the basis of alteration to the Scheme that
may be made. Thus, for the period of six month from now employees shall be required to
contribute @9.49% of Salary (8.33+1.16%) towards EPS-95 Scheme. urt suggested that
EPFO and the Govt. may make necessary amendments in the act as perthe due process
if additional resources is to be generated for the Pension Fund.

9. Court suggested that one way to generate additional resources could be

increasing the rate of employer’s contribution. However, SC held that they are not
speculating about it and left it to be decided by the Govt./ EPFO.

Increasing the rate of employer’s contribution would be an additional financial

burden on the employer and may be resisted by the organization specially in the
private sector. It may be also result in less take home salary for the employees for
CTC payroll/salary structure as employer may deduct its share from employee
salary itself.

10. SC ordered that its judgement in the R C Gupta case should be implemented by the EPFO
within eight weeks’ time from 04-11-2022 subject to the SC directives in this case.

Disclaimer:
This document has been prepared as per my personal understanding of the SC
order and for exact order please refer the Judgement of the Hon’ble Supreme
Court. No one is advised to act solely on the basis of this documents and before
initiating any action(s) or decision(s) please consult your employer or EPFO for
proper guidance in the matter and pro and cons of opting for contribution on actual
salary for getting higher pension.