Employees Pension (Amendment) Scheme 2014 is legal and valid: Supreme Court in EPF pension case

Employees Pension (Amendment) Scheme 2014 is legal and valid: Supreme Court in EPF pension case

On Friday, the Supreme Court given an important decision in the EPF pension case, which affects many employees across the country. The Apex Court ruled in a landmark decision that the provisions of the Employees Pension (Amendment) Scheme 2014 are legal and valid. However, in terms of the current members of the fund, the Court has read down certain provisions of the scheme.

While allowing appeals filed by the Employees Provident Fund Organization and the Union Government challenging the Kerala, Rajasthan, and Delhi High Court judgments that had quashed the scheme, the Court read down certain provisions of the Employees Pension (Amendment) Scheme, 2014.

A bench comprising the Chief Justice of India, Justice Aniruddha Bose, and Justice Sudhanshu Dhulia highlighted that: "The provisions laid down under the Employees' Pension (Amendment) Scheme, 2014, are legal and valid. Certain provisions have been read down for current members."

The deadline to join the scheme has been extended for four months for all employees who did not exercise their option but are still eligible to do so. The remaining requirements of the amended provisions must be met.

The employees who had retired before September 1, 2014, without exercising the option under the pre-amendment scheme would not be entitled to the benefit of this judgment as they have already exited the scheme.

The employees who retired before September 1, 2014, and who exercised the option shall be covered by Section 11(3) of the Pension Scheme as it stood before the 2014 Amendment.

The requirement of members to contribute at 1.16% if the salary exceeds Rs 15,000 as an additional contribution under the amended mentioned has been held to be invalid. But this part of the judgement is suspended for 6 months to enable authorities to make adjustments in the scheme so that additional contributions can be generated from other legitimate sources. For the above-mentioned period of six months or until such time as any amendment is made, whichever is earlier, employee contributions shall be a stop-gap measure. The said sum shall be adjustable based on any changes to the scheme that may be made.

No flaw found in altering the basis for the computation of pensionable salary.

The judgement of the division bench in RC Gupta vs. Regional Provident Fund Commissioner (2016) was accepted as regards the interpretation of paragraph 11(3) of the pre-amended scheme. Fund authorities shall implement the direction in RC Gupta's judgement within 8 weeks.

All appeals of the EPFO and the Union Government against the High Court’s judgments are allowed in the above terms, and the judgments that are impugned are modified accordingly.

The EPFO's main argument is that the Pension Fund and the Provident Fund are separate entities, and membership in the latter does not automatically imply membership in the former. It was argued that the Pension Scheme is intended for low-age employees, and allowing people earning more than the cut-off limit to draw pensions would create a huge imbalance in the fund. The amendments of 2014 were introduced to address the issue of cross-subsidization between pension and provident funds.

The pensioners disputed the EPFO's claim of financial burden. They claimed that the corpus fund was still intact and that the payments were made from the interest. The pensioners also argued that the EPFO's position that there must be a separate option exercised within the cut-off period to join the pension scheme is contrary to the statute.

Case Detail

EPFO vs Sunil Kumar and ors                          


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