The Central government has amended the Employees Pension Scheme (EPS), 1995 giving withdrawal benefits for employees with less than six months of service.
According to a government statement on Friday, the amendment is believed to benefit more than 7 lakh EPS members who leave the scheme with less than six months of contributory service.
The Centre has also modified Table D to ensure that the service for every month is taken into account and withdrawal benefits are given in proportion to the service provided. Table D refers to the members who have not offered the required service for the scheme’s eligibility or the members attaining 58 years of age.
The amount that can be withdrawn will now depend on the months a member has completed the service and the wages on which the EPS contribution was received.
Earlier, the withdrawal benefit was calculated based on the period of contributory service in completed years and the wages on which the EPS contribution was paid. This included a mandatory six-month contributory service. Hence, after completion of contributory service of six months and above, members were given benefits. The members who used to leave the scheme before six months were not entitled to the benefits.
Members were entitled to a withdrawal benefit after completing contributory service for six months or more. Members who left the scheme before six months were not entitled to the benefit. This was the reason why many claims were rejected for members exiting before providing the mandatory service. During the financial year 2023-24, the report stated that approximately 7 lakh claims for withdrawal benefits were denied due to contributory service being less than six months.
The government estimates that modifying Table D and simplifying the payment system will benefit more than 23 lakh employees under the scheme.
The earlier estimation under Table D did not consider the fractional period of service provided under six months after each year. According to the press release, this resulted in fewer withdrawals in many cases. The modification will remove discrepancies in the amount withdrawn by members.
According to the government statement, more than 95 lakh EPS members leave the scheme every year before providing the mandatory ten years of contributory service for pension.Such employees are given withdrawal benefits as per the Employee Provident Scheme.
More than 30 lakh withdrawal claims were settled in the financial year 2023-24, the report said.
The Employee Pension Scheme was introduced in 1995 for employees in the organised sector. Employees eligible for the Employee Provident scheme are also eligible for the pension scheme. Both employer and employee contribute to the fund, which is administered by the Employee Provident Fund Organisation (EPFO) under the Ministry of Labour and Employment.