“Useful Common RTI Query on Pro-rata calculation of Higher Pension”

“Useful Common RTI Query on Pro-rata calculation of Higher Pension”

To

The Central Provident Fund Commissioner,

Employees’ Provident Fund Organization,

Bhavishya Nidhi Bhavan,

14, Bhikaji Cama Place,

New Delhi – 110 066.

Respected Sir.

Sub:- RTI Act, 2005:-EPS,’95- Information requested under Right to Information Act, 2005 regarding implementation of Pro-rata basis for calculation of Pension on Higher Wages in case of those who are beneficiaries of the Judgement of 4th November, 2022 of the Hon’ble Supreme Court- Requested-Reg.

With reference to the above subject, this is to submit that on Page No: 10 of the Report of the Expert Committee on EPS,’95 constituted in the year 2009, it is stated as follows:

3. The statutory wage limit was increased in 2001 from 5,000/- to 6,500/- without being backed up by an actuarial advice. This injected an instant actuarial deficit to the tune of 10,000 crore in the EPS,’95 Fund as no provision was made to obtain the contributions on the enhanced salary for the earlier period of service already put in on which the benefits would eventually be paid at the time of superannuation. This can be explained with the help of an illustration as follows:

Illustration: Suppose a member, drawing a basic wage of 6,500 per month in 1996 was contributing to Pension Fund @ 5,000 per month due to the statutory wage ceiling of 5,000/- at that time.

in 2001, the wage ceiling was increased to 6,500/- and the member starts contributing to Pension Fund @ 6,500/- per month, At the time of superannuation, he becomes entitled to pension with pensionable salary of 6,500/- and the resultant calculation thereto. Thus, whereas he contributed @ 5,000/- for a certain period of pensionable service, he became entitled for pension at a pensionable salary of 6,500/-. This anomaly needs to be accounted for by breaking the benefit in two parts – one for the period when the pensionable salary was 5,000/- and the other when it was 6,500/- and the same should have been factored in.

Salary rise is normal in the career life span of an individual and the same is also taken into account during actuarial calculations. However, before effecting an amendment in wage ceiling, it should be backed by infusion of additional funds by way of additional contributions or modifications in benefits calculation as may be actuarially found feasible.

Example (Not mentioned in the report, but built-up to show the mximum out-go) Name XXXXXXXXXX

Date of Birth 01-09-1956.

Date of Appointment 01-09-1981. (25 years)

Date of attaining 58 years 31-08-2014.

Contributory         Service         under EFPS,’71 14 years, 2 months,15 days.

Contributory         Service         under EPS,’95 18 years, 9 months,15 days.

18X12+9+0.5M=225.5 Months.

On Pro-rata basis:

a) 16-11-1995 to 31-05-2001: 5 years, 6 months, 15 days:

5X12+6+0.5=66.5 months.

b) 01-06-2001 to 31-08-2014: 13 years, 3 months. 13X12+3=159 months.

NCP Days Nil

Wages as on 15-11-1995 More than 2,500/-

Weightage 2 years.

Calcuation of Pension on contributions under EPS,’95 from 16-11-1995 to 31-08-2014 on Pro-rata basis:

a) 5,000/840(70X12)X66.5=396/-*

b) 6,500/840(70X12)X159=1,230/-*

Weightage on Pro-rata basis:

a) 5,000/70X2X66.5/225.5=42/-*

b) 6,500/70X2X159/225.5=131/-*

=  396*+1,230*+42*+131*=1,799/-*

Taking 6,500/- as Pensionable Salary for the entire period of 16-11-1995 to 31-08-2014 along with Two Years Weighage: 6,500/840(70X12)X249.5(225.5+24)=1,931/-*

Difference: 132/- (1,931(-)1,799)

Thus this is the mximum difference when the Pension under Ceiling is calculated for the entire period from 16 11-1995 to 31-08-2014.

Further this is the maximum difference when the Contribution is exactly 417/- (8.33% of 5,000/-/ 16-11-1995 to 31-05-2001) and 541/- (8.33% of 6,500/-/01-06-2001 to 31-08-2014).

Further the employee has to contribute for the entire period exactly on Ceiling i. e., from

15-11-1995 to 31-08-2014 i. e., for a period of 18 years, 9 months and 15 days where the loss is 132/-. If the contribution is for less period there is less loss.

If the Employee’s Wages are less than 5,000/- for the 16-11-1995 to 31-05-2001 and less than 6,500/- from 01-06-2001 to 31-08-2014, there is no difference.

Here the estimated deficit is 10,000 crore as per the report, when the difference is only 132/- that too in case of only those who contribute exactly on ceiling i.e., 417/- from 16-11-1995 to 31-05-2001 and 541/- 01-06-2001 to 31-08-2014.

As per Page No. 22 of the Report of the High-Empoowered Monitoring Committee, out of 4,76,23,287 regular Contributors during the period April to August, 2018 (5 months), only 1,27,14,855 i.e., 26.7% are 1,001/- and above.

Whereas the exact contribution is 1,250/- i.e., 8.33% on 15,000/- Ceiling.

If the above figure of 1,27,14,855/- is further segregated into those contributing 1,001/- to 1,249/- and 1,250/- and above, the figure further goes down to around 20%.

Then one can imagine the percentage of Employees contributing exactly 417/- and 541/- respectively during the period 16-11-1995 to 31-08-2014 which definately will be less than 20%. For this the deficit is estimated @ 10,000/- whereas on Page No. 44 of 427 Page Affidavit submitted to Hon’ble Supreme Court in the month of January, 2021, the deficit on account of Two Years Weightge mentioned is 20,178 crores.

Two Years Weightage is to be given to every employees who has putin 20 years or more of Contributory Service both under EFPS,’71 and EPS,’95 or singly under EPS,’95, whereas loss on account of treating 6,500/- as Pensionable Salary for the entire period from 16-11-1995 to the date of attaining 58 years which (attaining 58 years) can be anytime on or before 31-08-2014 that too in case of around 20% employees is 10,000 crore which is not in consistency.

Similarly remark with regard to the deficit due to treating 6,500/- as Pensionable Salary for the entire period of 16-11-1995 to 31-08-2014, in actuarial reports for the Financial Years ending 31-03-2007, 31-03-2008, 31-03-2009 are as follows:

ii. The continuing effect of raised pensionable salary limit from 5,000/- to 6,500/- made effective for all members in the past without infusion of additional funds to meet the higher liabilities. (Page No. 5 of the report for the financial year ending 31-03-2007, Page No. 5 of the report

for the financial year ending 31-03-2008. Page No. 5 of the report for the financial year ending 31-03-2009)

In the combined Valuation Report for the Financial Years ending 31-03-2010, 31-03-2011, 31-03-2012, on Page No. 30, the Actuary stated as follows:

” Salary ceiling for the EPS is not rised for quite some time, the benefits gets eroded due to the inflation, but considering the effect the increase in the wage ceiling which can have on the financial health of the scheme, some alternative method to take care of inflation should be

considered. Any enhancement in salary ceiling for EPS may be done after looking at the effect on the fund. In our opinion if enhancement in the salary ceiling is made then a revision in the scheme will be required so as to give service credit (calculation on pro-rata basis) at different levels of salary ceiling.”

The jump in Ceiling is 1,500/- i. e., from 5,000/- to 6,500/- w. e. f. 01-06-2001 i. e., 30%, whereas it is 8,500/- i. e., from 6,500/- to 15,000/- w. e. f. 01-09-2014 i. e., 131%.

Similarly the jump in contribution from May, 2001 to June, 2001 is 124/- i. e., 417/- to 541/- a

rise of 30% whereas from August, 2014 to September, 2014, it is 709/- i. e., 541/- to 1,250/- a rise of 131%.

709/- is 5.72 times more of 124/-.

In case of contributions above Ceiling there cannot be such jump from the month of August, 2014 to September, 2014.

Hence Pro-rata calculation is implemented w. e. f. 01-09-2014 when the calculation of Pension is within the Ceiling as one of the amendments. The said amendment is as follows as mentioned on Page No. 11 of the Judgement of the Hon’ble Supreme Court of 4th November, 2022:

After modification:

11. Determination of Pensionable Salary. – (1) The pensionable salary shall be the average monthly pay drawn in any manner including on piece rate basis during contributory period of service “in the span of sixty months preceding the date of exit” from the membership of the Pension Fund and the Pensionable Salary shall be determined on pro-rata basis for the

pensionable service upto 1st day of September, 2014, subject to a “maximum” of “six thousand five hundred rupees per month”, and for the period thereafter at the “maximum” of “fifteen thousand rupees” per month.

Due to the words “maximum of six thousand five hundred” and “maximum of fifteen thousand” Pro-rata calculation is applicable only in case of Pension upto Ceiling.

Moreover there cannot be Piece Rate Wages in case of Employees eligible to contribute on Wages above the Ceiling.

The above amendment was upheld by Hon’ble Supreme Court on 4th November, 2022. Vide Lr. No: Acturial/18(2)/2008/XOI. 111/7738, Dt: 29-08-2014 addressed to all Zonal

Provident Fund Commissioners, Regional Provident Fund Commissioners, EPFO, Head Quarters stated as follows:

6. Further, with effect from 01-09-2014, wherever Employee & Employer have opted to contribute on Salary exceeding 6,500/- per month, such employer and employee will have to exercise a fresh option to contribute on salary exceeding 15,000/- per month subject to the condition that such member would have to contribute the Government share of contribution @ 1.16% on the salary exceeding 15,000/- per month from “his/her share of contribution”. The frest option is to be exercied within a period of 6 months. It is essential to know with certainty

the employees who are currently permitted to contribute on higher wages, so that fresh options can be called for. Accordingly you may flag all such cases of contribution on salary exceeding 6,500/- per month and obtain fresh options in a time bound manner. It may be made know

to the existing optees that if the fresh option is not excecised, it shall be deemed that the employee has not opted in allowing contributions over wage ceiling and the contributions made to Employees’ Pension Fund made above the Wage ceiling in respect of the member shall be reverted to the Provident Fund account of the member along with interest as declared under the Employees’ Provident Fund Scheme from time to time.

7. Further w. e. f. 01-09-2014, the Provision for contribution on Higher Salary has been deleted and as such no new options can be allowed to any member of EPS, 1995 on or after 01-09-2014.

The time limit of 6 months from 01-09-2014 to 28-02-2015 can be further extended for another six months i. e., upto 31-08-2015, on showing sufficient reason by the Employee who submits fresh option on or after 01-03-2015 by the Regional Provident Fund Commissioner.

The above instructions are as per the amendments carried out w. e. f. 01-09-2014 which were upheld by the Hon’ble Supreme Court on 4th November, 2022.

And the above instructions are issued in favour of Employees who opted for Higher Pension as per the Gazette Notification of 16th March, 1996 and opted upto 30th November, 2004.

There are 1,54,000 such Employees as on 31-03-2020 as per Page No. 415 of the 427 Page Affidavit submitted by EPFO in the month of January, 2001 in the Hon’ble Supreme Court.

In case of Employee who opted for Higher Pension as per the Gazettee Notification of 16th March, 1996 and opted upto 30th November, 2004, and on rolls as on 01-09-2014 and subsequently attained 58 years before the Judgement of the Hon’ble Supreme Court on 4th November, 2022, their Pension on Higher Wages is being calculated basing on the average of last 60 months before attaining the age of 58 years and Pension Orders issued accordingly.

Further the Judgement of 4th October, 2016 by the Hon’ble Supreme Court in case of Sri R. C. Gupta & Others is basing on EPS,’95 as it stood on 31st August, 2014.

The amendments implemented from 01-09-2014 are under challenge as on 4th October, 2016 in the Hon’ble High Court of kerala which invalidated the amendments only on 12th October, 2018 which was upheld by the Hon’ble Supreme Court on 1st April, 2019.

But the benefit of the Circular of 23rd March, 2017 which was issued after acceptance of Judgement of 4th October, 2016, was even extended to the Employees who have “not” opted as per Gazettee Notification of 16th March, 1996 upto 30th November, 2004 and on rolls as on

01-09-2014 and subsequently attaained 58 years but before keeping the Circular of 23rd March, 2017 in abeyance on 20-03-2021.

Some of the above category of Employees from Unexempted Establishments who are on rolls as on 1st September, 2014 subsequently attained 58 years but before keeping the Circular of 23rd March, 2017 in abeyance as on 20th March, 2021. The details of serveral such employees were appearing in the list of 21,229 employees from Unexempted Establishments which was submitted to Hon’ble Supreme Court in the month of August, 2022 as Additional Affidavit.

PPOs mentioned in the list: (few examples) I

1. Page Number of the Affidavit: 339.

2. Serial No: 805

3. PPO No: KRTVM00089148

4. Date of Birth: 02-06-1958.

5. Date of attaining 58 years: 01-06-2016.

6. Lower Pensionable Salary: 9,475/-

7. Higher Pensionable Salary: 1,38,806/-

8. Pension upto Ceiling: 2,628/-

9. Pension on Higher Wages: 45,155/-

10. Difference paid: 18,30,025/-

11. Arrears received: 21,24,933/-

II

1. Page Number of the Affidavit: 797

2. Serial Number: 13614.

3. PPO No: KRKKD00070092

4. Date of Birth: 01-12-1959.

5. Date of attaining 58 years: 30-11-2017.

6. Lower Pensionable Salary: 12,025/-

7. Higher Pensionable Salary: 57,839/-

8. Pension upto Ceiling: 2,942/-

9. Pension on Higher Wages: 20,316/-

10. Difference paid: 5,85,848/-

11. Arrears received: 4,33,730/-

C.

1. Page Number of the Affidavit: 791

2. Serial NumberNumber: 13466

3. PPO No: KRKKD00070736

4. Date of Birth: 28-09-1958.

5. Date of attaining 58 years: 27-09-2016.

6. Lower Pensionable Salary: 9,900/-

7. Higher Pensionable Salary: 80,277/-

8. Pension upto Ceiling: 2,635/-

9. Pension on Higher Wages: 26,622/-

10. Difference paid: 10,82,910/-

11. Arrears received: 9,63,623/-

The above a few examples among many in the list who are on rolls as on 01-09-2014 subsequently attaining 58 years and are beneficiaries of the Judgement of 4th October, 2016 in the case of Sri R. C. Gupta & Others.

Similarly placed Employee as stated in the examples who have not opted

for Higher Pension as per the Judgement of 4th Octeober, 2016 in case of Sri R. C. Gupta were given a “second” chance by the Hon’ble Court as stated on Page No. 48 of the Judgement:

There was uncertainty as regards the validity of the post amended scheme, which was quashed by the aforesaid judgements of the three High Courts. Thus, all the employees who did not exercise option but were entiled to do so but could not due to the interpretation of the cut-off

date by the authorities, ought to be given a further chance to exercise their option. Time to exercise option under Para 11(4) of the scheme, under these circumstances, shall stand “extended” from the date of Judgment i. e., 4th November, 2022, by a further period of four months. We are giving this direction in exercise of our jurisdiction under Article 142 of the Constitution of India.

Here the Hon’ble Supreme Court has to use its jurisdiction under Article 142, because it upheld all the amendments which includes deletion of the provision for option to Higher Pension w. e. f. 01-09-2014 to allow employees who have not opted for Higher Pension before 01-09-2014 to opt after 01-09-2014 using its extraordinary powers.

Here the word “extended” means the time given to Employees who opted for Higher Pension as per the Gazettee Notification of 16th March, 1996 and opted upto 30th November, 2004, and were asked to further opt under Para No: 11(4) were given time for a period of six month from 1st september, 2014 to 28th Februay, 2015, which is further extendable to another six months upto 30th September, 2015 at the discretion of Regional Provident Fund Commissioner, on showing sufficient reason for option on or after 1st March, 2015 was further “extended” from the date of judgement i. e., 4th November, 2022, to another four months as mentioned in the Judgement of 4th November, 2022.

Thus Employees who are are on rolls as on 1st September, 2014 and not opted for Higher Pension on par with similarly placed (on rolls as on 1st September, 2014) were “eqated” with the Employees who opted for Higher Pension as per the Gazettee Notification of 16th March,

1996 and opted upto 30th November, 2004 by using the words “further extended” by the Hon’ble Supreme Court in the Judgement.

After validating all the amendments which includes deletion of option for Higher Pension w. e.

f. 01-09-2014 and restricting the Penionable Salary to 15,000/- w. e. f. 01-09-2014, the Hon’ble Supreme Court has given justification on Page No: 34:

” We also do not accept the argument that the pension scheme considers employees as a homogenous group and no distinction can be made among different categories of employees based on their monthly salary to determine for whom the scheme shall operate in a particular manner. It is well within the power and authority of the statutory authorities to reasonably classify different sets of employees and categories them for the nature of benefits they migh get from an existing scheme. In fact, the scheme, at its inception was made applicable to those drawing wages upto 5,000/-. The provision relating to exercising option was introduced later, in the year 1996,”

When Hon’ble Supreme Court “equating” the Employees who are on rolls as on 01-09-2014 and subseqently attain/attained 58 years, on par with the Employees who opted for Higher Pension as per the Gazettee Notification of 16th March, 1996 and opted upto 30th November, 2004, and were on rolls as on 01-09-2014 and attained 58 years before 4th November, 2022 (the date of the Judgement) and getting Higher Pension already basing on the last average sixty months before attaining the age of 58 years, how can there be separate methodology for computation of Pension in case of those who are on rolls as on 01-09-2014?

Further even in case of those who are on rolls as on 01-09-2014, some employees are already getting Higher Pension basing on last 60 months average and from Unexempted Establishments based in the judgement of 4th October, 2016 and the remaining employees

who are similarly on rolls as on 01-09-2014 cannot be subjected to different computation i. e., on Pro-rata basis as per the E-Mail sent by EPFO Head Quarters to Regional Provident Fund Commissioner vide E-Mail: 1660221/2024/Pension @ 4.09 PM on 23-01-2024 which is as follows:

” 2 In this connection it is stated that there is no separate formula in EPS, 1995 for members who will be eligible for Pension on Higher Wages in compliance with the directions of the Hon’ble Supreme Court. Therefore the same methodology of Pro-rata determination of Pensionable Salary taking averge month’s Pay drawn during the contributory period of service in the span

of 60 months preceding the date of exit from the membership of the Pension Fund for post 01-09-2014 retirees will be utilised for calcuation of Pension on Higher Wages.”

In the Judgement of the Hon’ble High Court of Kerala delivered on 12th October, 2018 it is stated as follows on Page No: 61,62 and 63 it was stated as follows on Page No: 61, 62 and 63:

55. It is submitted that in the case of Petitioners who are contributng on actual wages also the calculation of pensionable salary on the basis of average salary during the 12 months would result in disbursement of pensionary benefits disproportionate to the contribution remitted by the employer on their behalf under the Employees’ Pension Scheme, 1995. A cursory perusal of the salary details and contributions received by the Employees’ Provident Fund Organisation (EPFO in short) in one of the cases revealed that the employer was contributing to the Pension Fund on his behalf on wages ranging from 59,595/- to 1,02,971/- during the 5 year period. The

range of salary for the 12 months preceding the date of retirement is 93,000/- to 1,02,971/-. The quantum of pensionable salary and pensionary benefits on the basis of average salary for the 12 months preceding his retirement in such cases will be very high and the pensionary benefits will not be commensurate with the contributions received by the EPFO. In any case, the Notification envisages payment of optimum pensionary benefits commensurate with the contribution remitted by the employer on their behalf because the benefits are quantified purely based on

the wages on which the employer had contributed on pension fund in respect of each member during the membership.

31. The contention therefore is that, payment of pension computed on the basis of the contributions made on their actual salaries by the employees would deplete the Pension Fund and would make the Scheme unworkable. The above contention cannot be accepted as a legal and valid ground for scaling down the quantum of pension that the entitled to receive, as per law. We have noticed that, as per the Scheme of the Act, the Pension Fund is constituted by transferring 8.33% of the employer’s contribution remitted to the Employees Provident Fund under Section 6 of the EPF Act, without making the employees liable for any further contribution. We have found that the Pension Scheme was to ensure to the benefit of all employees who were covered by the Employees Provident Fund Scheme. Since option was given to employees to make contributions in excess of the ceiling limit, and on the basis of the actual salaries drawn by them, no other restriction can be imposed on their right to receive pension. No additional payment by the employees is also contemplated by Section 6A of the EPF Act. Therefore, the insistence on payment of additional 1.16% of their salary towads the Pension Fund by amending the Pension Scheme also cannot be sustained.”

Here, though the arguments of EPFO, it is clear that Higher Pension in case of those who are on rolls as on 01-09-2014 can be paid basing on the average of last 60 months and also by additional contribution of 1.16% of Government share on Wages above 15,000/- from the employee.

When this formula was applied to:

a) in case of those who opted for Higher Pension based on the Gazettee Notification of 16th March, 1996 and opted upto 30th November, 2004 and on rolls as on 01-09-2014 and subsequenty attained 58 years.

b) in case of those who have “not” opted for Higher Pension as per Gazette Notification of 16th March, 1996 upto 30th November, 2004, and to whom EPFO allowed the benefit of the Judgement of 4th October, 2016 in Sri R.C. Gupta & Others and are from Unexempted Establishments and are on rolls as on 01-09-2014 and subsequently attained 58 years.

How can there be another formula for the remaining employees other than those mentioned in

(b) in addition to (a)?

Hon’ble Supreme Court allowed collection of 1.16% share of Wages from the Employer’s Contribution (not Employee’s Contribution) equally from all the Employee i.e., those mentioned in (a) (b), along with the benefiaries of the Judgement of 4th November, 2022, how can there be another Computation method (Pro-rata) for the beneficiaries of the judgement of 4th November, 2022?

Further Para No 44(V) of the Judgement of the Hon’ble Supreme Court of 4th November, 2022, which disallowed the benefit of Higher Pension to those who have not opted while in service and attained 58 years on or before 31-08-2014 was implemented in case of all such employees uniformly such as those:

a) who are from Exempted Establishments and attained 58 years on or before 31-08-2014 and not opted as per Gazette Notification of 16th March, 1996 and upto 30th November, 2004.

b) who are from Unexempted Establishments and attained 58 years on or before 31-08-2014, who were extended the benefit of the Judgement of 4th October, 2016 numbering 24,672 as per the RTI information supplied and 21,229 as per the list submitted to Hon’ble Supreme Court in the month of August, 2022.

c) who are from Unexempted Establishments attained 58 years on or before 31-08-2014, and opted for Higher Pension as per the Circular of 23rd March, 2017 but their options were rejected due to keeping the above circular in abeyance on 20th March, 2021.

Why EPFO thinking differently in case of those who are beneficiaries of the Judgement of 4th November, 2022 regarding the formula for computation of Higher Pension differently?

Therefore I request your Good-selves to provide me the information which justifies Pro-rata calculation of Higher Pension to the beneficiaries of the Judgement of 4th November, 2022.

I am enclosing herewith Indian Post Order No:…………………………………. for 10/- as necessary fee please.

Thanking You Sir,

Yours faithfully, Signature…………………………………………………………

Name……………………………………………………………..

Mobile No……………………………………………………… Address………………………………………………………………………………………….

……………………………………………………………………………………………………..

…………………………………………………………………………………………………….. Station………………………………………………

Date………………………………………………….

G. Srinivasa Rao, Mobile No: 89851 72459 & WhatsApp No: 6300114361