February 26, 2023

SC Judgment on EPF Pension: Unending Travails of Pensioners

R Karumalaiyan

THE Supreme Court of India has delivered an important judgment on November 4, 2022 on the Employees’ Pension Scheme-95 (EPS-95). At the outset, it is all the more relevant here to clarify that this judgment has nothing to do with the question of enhancement of minimum pension under EPS-95, on which lakhs of industrial workers have been agitating since long.

Over time, the EPS-95, for which huge workers’ money is taken away, became a mockery with lakhs of workers getting less than Rs 100 per month as pension. As the demand for increasing the minimum pension became widespread, the UPA II government decided to increase it to Rs 1,000, but failed to implement it. Then the NDA government started implementing it in 2014, but with some conditionalities and formulae to keep pensions as low as possible. Accordingly, Prime Minister Modi announced the so-called “mega pension” reforms by bringing amendment to the scheme in 2014 which, though increased the wage ceiling to Rs 15,000 from Rs 6,500, has nullified the choice of an employee to exercise the right to contribute to EPS on higher/uncapped salary so as to earn higher pension. Accordingly, the proviso to Paragraph 11(3) of EPS, which paved the way for higher pension by allowing contribution on ‘actual salaries’ irrespective of statutory ceilings, was also deleted by this 2014 amendment of the Modi regime.


The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 originally did not provide for any sort of pensions as it was enacted then to only provide for the institution of provident funds. Later it was amended to provide for pension and deposit-linked insurance (assurance) benefits to workers. Accordingly, one flawed Family Pension Scheme was formulated in 1971. It may be recalled that CITU was alone in opposing that 1971 Scheme on the ground that it took away more money from the workers and gave back much less. CITU has been persistently demanding pension as a third benefit along with PF and gratuity.

Much to the disappointment of the industrial workers, the government brought in another truncated pension scheme called Employees’ Pension Scheme (EPS 1995), with effect from, November 15, 1995, replacing the then existing Family Pension Scheme, 1971. It also heavily diverted worker’s PF money to pension funds. A major portion of the employer’s contribution to the PF Fund to the tune of 8.33 per cent was diverted to EPS thereby reducing the total PF benefit to the workers. Ironically, it is being branded as an “employer contribution to pension”, when, in practice, they are not sparing a single penny towards the pension fund!

The EPS-95, which is administered by the EPFO, purportedly aims to provide employees with pension after the age of 58. Both the employee and employer contribute 12 per cent of employee’s basic wages plus dearness allowance to the provident fund. Here the entire worker’s contribution is alone going to the provident fund. On the other hand, the 12 per cent contribution made by the employer is being split into two parts as 3.67 per cent to PF and the rest 8.33 per cent to Employees’ Pension Scheme-1995. Apart from this, the central government contributes 1.16 per cent as well to the employee’s pension kitty.



Trade unions as well as workers are more concerned about more coverage and the enhancement of pension under EPS. Trade unions including CITU have all along demanded that the statutory wage ceiling for calculating pension be done away with. At some point, the maximum pensionable salary for the calculation of contribution to EPF/EPS was Rs 5,000 per month which later was raised to Rs 6,500.

A couple of months after the Employees’ Pension Scheme was framed with effect from November 16,1995, a proviso was added to para 11(3) to the Scheme with effect from March 16, 1996 permitting a joint-option to the employer and employee for contribution on ‘actual salary’ exceeding statutory wage ceiling limits - Rs 5,000 or Rs 6,500 (with effect from October 8, 2001) per month. Accordingly, 8.33 per cent of such contribution on full salary was required to be remitted to the pension fund.

Further, it is more relevant to mention that in 1959 itself, the central government through a notification had added a para called “para 26” to the Employees Provident Fund Scheme, 1952. The sub-para (6) of para 26 had allowed the employer and employee on their joint request in writing to contribute to EPF more than statutory ceiling limits. This sub-para 26(6) is still there in the EPF Scheme framed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.


Thus an option to increase pension is provided for in EPS-1995, for which 8.33 per cent of the employer’s contribution to the employee’s PF account must be remitted into the pension fund on actual basic pay, dearness allowance and retaining allowance. The request for a higher pension should be made in the form of a joint option exercised by both employee and employer. But due to lack of information, most members did not exercise this option and have been contributing to the pension fund only within a salary cap (which was revised from Rs 6,500 to Rs 15,000 eight years ago), and not on actual pay. This has reduced the pension benefit sharply.

The litigation by employees arose because the union government amended EPS-1995 effective on September 1, 2014, introducing, among other changes, a time limit of six months for the members, jointly with their employers, to opt for higher pension based on their actual salary, and a further six months where reasonable cause for delay existed. The time limit was, however, not known to the employees as there was no communication to them; subsequent applications for higher pension were rejected by the EPFO citing the cut-off date, even after it had been set aside by a two-judge bench of the Supreme Court in the precedent-setting R C Gupta case in 2016.

Workers challenged this amendment to EPS-95 called the Employees’ Pension (Amendment) Scheme, 2014 along with their ongoing legal battles for enhanced pension based on actual salary in different high courts across the country.

The High Courts of Kerala, Rajasthan and Delhi delivered judgments in favour of employees. It invalidated the 2014 amendments also. When EPFO filed a Special Leave Petition (SLP) challenging all these in the Supreme Court, it got a thorough drubbing invariably in all these cases. Then it filed a review petition and the case was again re-opened and referred to the three-judge division bench of the Supreme Court which delivered the verdict on November 4.


* There will not be any differentiation between exempted establishments and non-exempted establishments. Members and pensioners in both the above categories will be treated alike.

* Those who exercised joint option prior to retirement before 2014 September will be entitled to get enhanced pension on their actual pensionable salaries beyond the limit of Rs 15000, if so.

* Those pensioners who did not exercise joint option prior to retirement before 2014 will not be entitled to get enhanced pension.

* Those pensioners who retired after September 2014 without exercising joint option and those members who continue in service now will be permitted to exercise joint option within four months (that is before March 3, 2023) from the date of present judgment.

* Those who exercised the joint option before 2014 and retired thereafter will continue to get enhanced pension based on their actual pensionable salary.

* Pensionable salary for the purpose of computation of pension will be the average of the last 60 months’ actual salary as on the date of retirement.

* 1.16 per cent of additional payment for the amount above Rs 15,000 to be levied from the employees is suspended for six months as this is done without bringing necessary amendment in the parent act. However it will continue to be levied from the employees during this interregnum. If no amendment is made in the statute during this period, it will cease to be levied from the employees.


Yes, the Supreme Court upheld the Employees’ Pension (Amendment) Scheme, 2014, which paved the way for the enhancement of the wage ceiling to Rs 15,000 per month for the calculation of contribution. In other words, it really restricts the membership of the Scheme up to a wage limit of Rs 15,000 per month. It is pertinent to mention that since the inception of the pension scheme, CITU had been demanding that the pensionable salary should have no ceiling whatsoever. However, the judgment has provided some relief to certain employees.

One section of current employees (and by extension members of the pension scheme who were contributing to the pension fund as of September 1, 2014) stand to benefit from the order. The SC bench directed that members of the scheme who did not exercise the option for higher pension as provided for in the scheme as it existed before the 2014 amendment, were entitled to exercise the option, jointly with their employers, even under the amended scheme. This right was upheld in the R C Gupta judgment, which said no cut-off date was envisaged in EPS-1995.

The court said that all employees who did not exercise the option but were entitled to do so due to interpretation of the cut-off date by authorities should get a further four months to do so from the date of the order. The implication is that those who were members of EPS-1995 as of September 1, 2014 and beyond could exercise the joint option. This means that serving employees can opt for higher pension now, transferring the stipulated part of the employer’s contribution to the pension fund. Other members, who contributed to the fund beyond that date but retired, would have to remit the stipulated dues into the pension fund.

Yet, the court specifically excluded those who retired prior to September 1, 2014 without exercising the joint option in the un-amended scheme, since they had already exited the membership. This part of the order covers older employees who get a meagre pension. They cite lack of communication on the option of higher pension while in service.

All these directions should be implemented within eight weeks – i.e., before December 29, 2022. But EPFO came with one circular on the last day of deadline stipulated by the Supreme Court on December 29, 2022. Another one was issued on February 20, 2023. Meanwhile, in the name of “overpayment of pension”, the pension has been stopped and reduced since January 2023 onwards for many pensioners including R C Gupta whose case set the major legal precedent in this case.
It is not a comprehensive response from EPFO to implement the whole judgment in letter and spirit. Rather it is inconsistent with judgment. These circulars basically confine to the issue of complying only few aspects of the order, providing opportunities to a small section of pensioners to apply for higher pensions with all deformities so as to defeat the very purpose of the judgment thereby denying a higher pension to poor pensioners.

Even the tripartite statutory body like the Central Board of Trustees (CBT) was not taken into confidence by the central government thus far; leave alone consultations with central trade unions. Our labour ministry is more preoccupied with celebrations of L20, following PM Modi’s ‘heights’ in G20! Thus the judgment came but the travails remain unending. Let all sections of working people and all sections of pensioners jointly intensify the struggle for universal social security and to achieve the demand of ‘pension for all’.


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