EXPLANATION OF THE SUPREME COURT JUDGEMENT
Wage Limit Per Month
01.10.1994 to 31.05.2001
01.06.2001 to 31.08.2014
1. Pensionable wages ceiling is Rs 5000 w.e.f 01.10.1994 and Rs 6500 w.e.f 01.06.2001 on which PF and Pension contribution is mandatory.
2. Members and employers, in this case, contributed on wages more than statutory ceiling limit as required under Para 11(3) of Employees’ Pension Scheme 1995 read with Para 26(6) of Employees’ Provident Fund Scheme 1952.
3. The contribution was made without the approval of the joint option of the employer-employee to contribute on wages higher than statutory ceiling limit.Supreme Court Judgement
1. A beneficial Scheme should not lapse for the reason that an option was not exercised before due date but remittance was made on wages above statutory limit.
2. Excess payment made in PF amount may be taken back with interest.
3. Benefit of Pension on increased contribution may be given by necessary book adjustments.Process Involved – Understanding through an Illustration
1. Hiralal, Bansilal and Sonelal were employed in Parishram Enterprises at wages of Rs 9000 each from 1998 to 2013, when both of them superannuated.
2. For Hiralal PF contributions were made at Rs 6500, while for Bansilal and Sonelal contributions were made on full wages.The situation arising can be tabulated as below :
Contribution towards PF(B)
12% of 6500 (Ee Share) + 3.67% of 6500 (Er share)
12% of 9000 (Ee Share)+3.67% of 9000 (Er share)+
8.33% of (9000-6500)
12% of 9000 (Ee Share)+3.67% of 9000 (Er share)
Contribution towards Pension(C)
8.33% of 6500 (Er share) + 1.16% of 6500 (Govt)
8.33% of 6500 (Er share)+1.16% of 6500 (Govt)
8.33% of 9000 (Er share)+1.16% of 9000 (To be paid by member)
Whether PF account settled(D)
Indicative PF and Pension Benefits(E)
1. Principal plus interest on all contributions in PF account2. Pension calculated on wage ceiling of Rs 6500.
1. Principal plus interest on all contributions in PF account.2. Pension calculated on wage ceiling of Rs 6500.
1. Principal plus interest on all contributions in PF account.2. Pension calculated on wage ceiling of Rs 6500. Balance in Pension account moved to PF account and settled with interest.
Any effect of SC judgement on Pension
Process to claim benefits
1. Submit a request to concerned PF office undertaking to refund excess PF claimed with interest.2. Pension will be recalculated taking Pension Wages as Rs 9000.
The perception around this judgement is “Supreme Court has directed EPFO to increase Pension for all members”.
However, in reality, the judgement simply permits members/pensioners to claim Pension on higher wages if contribution was paid on higher wages. However, members/pensioners will have to return the excess PF claimed with interest.
Most of the Pensioners will not be in a position to return excess PF of several thousand rupees in order to get their Pension increased by few hundreds.
Therefore pensioners/members have to make an informed choice.
Thus the Hon’ble Supreme Court has allowed only the exercise of option for higher pension contribution to those who were already contributing PF on higher salary with equal share of employers but could not exercise option earlier as per para 26(6) of the Scheme, 1952