The Supreme Court ruling

and EPFO Circular on

higher pension

28 February 2023

Page 1 28 February 2023

Contents
1 2 3 4 5
Legislative The Supreme Eligibility to Case studies Next steps
context Court ruling opt for higher
and EPFO pension
circular
1 Legislative context
 The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
(Provident Fund Act)

Employees’ Provident Funds Employees’ Pension Scheme,

Employees’ Deposit-Linked
Scheme, 1952 1995
Insurance Scheme, 1976
(‘Provident Fund Scheme’) (‘Pension Scheme’)

Administered Administered
Administered by EPFO Administered by EPFO
by EPFO by Trust

Lumpsum withdrawal and interest Service of less Life insurance benefit in case of
Service of 10
upon retirement or death than 10 years– death
years or more –
Lumpsum
Monthly pension
withdrawal as
on retirement
per Table D

Page 4 28 February 2023

 Contributions under the Provident Fund Act

Employer’s contribution – 12% of Monthly Pay Employee’s contribution – 12% of Monthly Pay

8.33% of Wage Ceiling Balance

Pension Scheme Provident Fund Scheme

*INR 5,000 p.m. till 31 May 2001; INR 6,500 till 31 August 2014 and INR 15,000 from 1 September 2014 onwards;
Employer’s contribution to Pension Scheme is calculated on Monthly Pay if the same is lower than wage ceiling
Page 5 28 February 2023
Illustration – Contribution to pension scheme on wage ceiling

Amount in INR

Particulars Employee A Employee B

Basic Salary 1,00,000 25,000
A. Employee’s contribution, split as follows: 12,000 3,000
To Pension Scheme – Nil 0 0
To Provident Fund Scheme – 12% of monthly pay 12,000 3,000
B. Employer’s contribution, split as follows: 12,000 3,000
To Pension Scheme - 8.33% of INR 15,000 1,250 1,250
To Provident Fund Scheme – Balance amount 10,750 1,750

Total contribution to Pension Scheme 1,250 1,250

Total contribution to Provident Fund Scheme 22,750 4,750
Total 24,000 6,000

Page 6 28 February 2023

 Proviso to Para 11(3) – Option to contribute to Pension Scheme on higher salary

Pre September 2014

Employer’s contribution – 12% of Monthly Pay Employee’s contribution – 12% of Monthly Pay

8.33% of Monthly Pay 3.67% of Monthly Pay

Pension Scheme Provident Fund Scheme

Note: Applicable from the date of joining or the date when the Monthly Pay exceeds the prevalent statutory wage ceiling
Page 7 28 February 2023
 Notification dated 22 August 2014 – Amendments to the Pension Scheme effective 1 September 2014

Para 11(3) deleted

Para 11(4) added
Pensionable Higher pension
Wage ceiling Eligibility
salary option

Increased from INR Employee becoming member of To be calculated on Option to continue contribution
6,500 to INR 15,000 Provident Fund on or after 1 average monthly pay of towards Pension Scheme on
September 2014 with monthly 60 months instead of 12 higher salary available, subject to
pay exceeding INR 15,000 - not months conditions:
eligible to become member of the
Pension Scheme Fresh joint option application to
filed by 31 August 2015

Additional contribution of 1.16%

of monthly pay exceeding INR
15,000 per month to be
deposited out of the employee’s
Page 8 28 February 2023
contribution
 Para 11(4) – Option to contribute to Pension Scheme on higher salary

Post September 2014

Employer’s contribution – 12% of Monthly Pay Employee’s contribution – 12% of Monthly Pay

1.16% of Monthly Pay Balance

8.33% of Monthly Pay 3.67% of Monthly Pay
exceeding INR 15,000

from the date of from 1 September

joining* till date of 2014 till 3 May 2023
exit

Pension Scheme Provident Fund Scheme

Page 9 28 February 2023

Illustration – Contribution to pension scheme on higher salary

Amount in INR

Particulars Employee A Employee B

Basic Salary 1,00,000 25,000
A. Employee’s contribution, split as follows: 12,000 3,000
To Pension Scheme - 1.16% of [Monthly Pay less INR 15,000]* 986 116
To Provident Fund Scheme – Balance 11,014 2,884
B. Employer’s contribution, split as follows: 12,000 3,000
To Pension Scheme - 8.33% of Monthly Pay 8,330 2,083
To Provident Fund Scheme – 3.67% of Monthly Pay 3,670 917

Total contribution to Pension Scheme 9,316 2,199

Total contribution to Provident Fund Scheme 14,684 3,801
Total 24,000 6,000
* Applicable from 1 September 2014 to 3 May 2023
Page 10 28 February 2023
 Option to contribute on higher salary for higher pension

Pre 1 Sep 2014 Effective 1 Sep 2014

Proviso to Para 11(3) of Pension Scheme Para 11(4) of Pension Scheme

► An employee could avail option, with the consent ► An existing member, who has been contributing on
of the employer, to allocate higher share of a higher salary, will be required to make a fresh
employer’s contribution to the Pension Scheme option, jointly with the employer to continue to
contribute on higher salary (salary exceeding the
wage ceiling of INR 15,000)
► Such option is to be availed from the date salary
exceeded the wage ceiling (INR 6,500 in August
2014) ► Such option was required to be availed on or before
31 August 2015

► Additional contribution of 1.16% of monthly pay

exceeding INR 15,000 per month to be diverted out
of the employee’s share of contribution towards
Provident Fund Scheme to Pension Scheme

Page 11 28 February 2023

 Monthly pension calculation under Pension Scheme

Where service is 10 years or more

Monthly Pension = Pensionable Salary X Pensionable Service / 70

If contributed on wage ceiling If contributed on higher salary

Pensionable Salary = Based on wage ceiling Pensionable Salary = Based on higher salary

Monthly pension = Wage ceiling x Pensionable Monthly pension = Higher salary x Pensionable
service / 70 service / 70

Page 12 28 February 2023

 Monthly pension in case of death of member

Monthly widow
Children pension
pension

Death during service Higher of: Payable till the employee

► Full monthly pension as if the member had retired attains age of 25 years
on the date of death
► Amount calculated as per Table C ► If widow pension is paid –
25% of monthly widow
pension per child up to 2
Death after Higher of: children
retirement but before ► Full monthly pension as if the member had
58 years retired on the date of actual retirement ► If widow pension not paid –
► Amount calculated as per Table C 75% of monthly widow
pension per child up to 2
children
Death after start of 50% of monthly pension payable to member
monthly pension on
retirement

Note: There will be no return of corpus after the death of the member, death of spouse and after the children attain 25 years of age

Page 13 28 February 2023

Illustration – Calculation of monthly pension payable to retired employee

Amount in INR

Employee A Employee B
Particulars
On wage ceiling On higher salary On wage ceiling On higher salary
Basic Salary 1,00,000 1,00,000 25,000 25,000
Pensionable Salary (assumed)
15,000 90,000 15,000 20,000
(average salary for past 60 months)
Pensionable Service 35 years 35 years 35 years 35 years
Computation of monthly pension
To member till death
7,500 45,000 7,500 10,000
(Pensionable salary x 35 years / 70)
To widow after death of employee
3,500 22,500 3,500 5,000
(50% of monthly pension)
To child after death of widow
(25% of monthly widow pension till child 875 5,625 875 1,250
attains 25 years)

Page 14 28 February 2023

2A The Supreme Court ruling
 Supreme Court ruling of Nov 2022 in the case of Sunil Kumar and Others – Key highlights

Notification dated 22 August Eligible employees can opt for

2014 was held to be legal higher pension under Para
and valid subject to certain 11(4) of Pension Scheme on
directions or before 3 March 2023

Additional contribution of 1.16%

Eligibility of members for higher from employee’s share held to be
pension was clarified ultra-vires but to continue for 6
(next slide) months or till such time any
amendment is made, whichever
is earlier

Page 16 28 February 2023

 Supreme Court ruling of Nov 2022 in the case of Sunil Kumar and Others – Key highlights

Members who retired before 1 Members who continued to be

September 2014 without in service as on 1 September 2014
exercising option for higher and had exercised the option under
pension erstwhile Pension Scheme
Members who continued to be
in service as on 1
September 2014 and had not
exercised the option under
Not eligible to opt erstwhile Pension Scheme
To be guided by
for higher pension amended Para 11(4)

Eligible to opt for

higher pension

Page 17 28 February 2023

2B EPFO Circular on ruling
 EPFO Circular dated 29 December 2022

► On 29 December 2022, the EPFO has issued guidelines for an employee, satisfying all the following conditions,
to avail higher pension option on the EPFO portal:

1
Retired employees who were contributing to Provident Fund Scheme on salary
Condition
exceeding the prevalent wage ceiling of INR 5,000 or INR 6,500

2
Condition Exercised joint option under proviso to Para 11(3) of Pension Scheme

3
Condition The exercise of such option was rejected by the EPFO

Page 19 28 February 2023

 EPFO Circular dated 20 February 2023

► On 20 February 2023, the EPFO has issued further guidelines for an employee, satisfying all the following
conditions, to avail higher pension option on the EPFO portal:

1
Employees who were contributing to Provident Fund Scheme on salary exceeding the
Condition
prevalent wage ceiling of INR 5,000 or INR 6,500

2
Condition Did not exercise the joint option under proviso to Para 11(3)

3
Were members of Pension Scheme prior to 01 Sep 2014 and continue to be a
Condition
member on or after 01 Sep 2014

► The above EPFO Circular has also mentioned that if the employees had exercised the option under proviso to Para
11(3), continued to be on service on or after 01 Sep 2014 and have not exercised the option within the time limit
under Para 11(4) (i.e. by 31 Aug 2015) will not be eligible to exercise the option now
Page 20 28 February 2023
 EPFO Circular dated 20 February 2023 – Other aspects

Joint option Joint option application to be filed by employee and employer to also contain the
application following:

► Proof of remittance of employer’s share towards Provident Fund Scheme on monthly

pay exceeding wage ceiling and proof of joint option under Para 26(6) of the
Provident Fund Scheme duly verified by employer

► Explicit consent from employee for adjustment of funds from Provident Fund to
Pension Fund or for re-deposit to the Pension Fund

Guidelines yet to be ► Form and manner of request to be made by the employee*

issued by EPFO
► Method of deposit of past corpus from the Provident Fund Scheme to the Pension
Scheme along with interest till the date of refund / adjustment
► Method of computation of monthly pension

*While the EPFO has not issued any notification / circular to prescribe the form and manner of application, they have activated an online
facility for members to submit the joint option application form on the EPFO member portal. The contents of the online form are
summarized in the subsequent slides. Further clarity on the guidelines / manner of filing the online form may be issued by the EPFO

Page 21 28 February 2023

 Joint option application on EPFO online portal as on 28 February 2023

Information / confirmation to be submitted by member

► Personal details - UAN, Name, Date of birth, Aadhaar, Aadhaar linked mobile, Aadhaar generated OTP
► Service details – Member ID; Date of joining EPS; Date of exit EPS
► Member details – Email id; Aadhaar linked bank account number and IFSC code

► Following details relating to joint option and contribution:

► Whether employer’s contribution was received on wages exceeding statutory wage ceiling of ₹5000 in EPF prior to
01.06.2001 from the day his salary exceeded ₹5000? (applicable only if date of joining is prior to 01.06.2001)

► Whether Employer’s contribution was received on wages exceeding statutory wage ceiling of ₹6500 in EPF prior to
01.09.2014 from the day his salary exceeded ₹6500? (applicable only if date of exit is on or after 01.06.2001)

► Whether member wants to use accumulation available in his / her PF account for payment of due contribution for this
option?

► Whether member is giving undertaking to deposit the contributions along with interest due till date of payment through his
last employer [only when PF account has no/ insufficient balance]?

► How much is the PF account balance on the date of filing option?*

Page 22 28 February 2023

 Joint option application on EPFO online portal as on 28 February 2023

Documents to be uploaded by the member

► Permission granted under para 26(6) of EPF Scheme whereby the EPFO has allowed the employee to contribute
towards EPF Scheme on an amount more than the statutory ceiling

► Documentary proof showing the amount of balance in the EPF account - such as Account Slip / pages of the
Passbook etc.

► Undertaking from the member to deposit the contributions due under the EPS Scheme along with interest till date
of payment, through the last employer (where the EPF account does not have sufficient balance)

Page 23 28 February 2023

 Joint option application on EPFO online portal as on 28 February 2023

Declaration to be confirmed by member

► I hereby declare that I have read and understood the Judgement in SLP (C) No.8658- 8659 of 2019 dated 04-11-2022 of the
Hon’ble Supreme Court and I am exercising this joint option in terms of the directions contained in the said judgement.
► I understand and agree that as a member of the Employees’ Pension Scheme, my rights to claim pension are limited to the scope of
judgement and within the EPF & MP Act, 1952 and the Schemes framed thereunder.
► I further understand that the Central Government is empowered to amend the scheme as it may deem fit.
► I do hereby agree that the details of contribution and interest given by my employers are essential for the computation of dues
payable for this application, and this is the full and final submission.
► I hereby undertake that the service details in the above form are correct and no material fact has been misrepresented or hidden by
me.
► I hereby agree to pay due contribution in a single tranche as specified by EPFO, along with interest at rates declared under Para 60 of
EPF Scheme 1952 or at the rate declared by the concerned trust of such establishment, from time to time, whichever is higher, if any.
► I hereby jointly opt along with my employer to pay full amount of contribution on salary exceeding wage ceiling under erstwhile para
11(3) (since deleted) and Para 11(4) of EPS 95 along with interest up to the last date of the month in which payment is made, in
accordance with the judgement dated 04.11.2022 of the Hon’ble Supreme Court through my last employer within such period as
may be directed by EPFO after verification of my joint option. If the full amount payable is not deposited by my last employer within
such period as may be directed by EPFO after verification of my joint option, this joint option shall be liable to be treated as Null and
Void.
► I undertake that all the facts are true. If the details submitted by me or my employer are found to be incorrect at any point of time,
this joint option shall be treated as Null and Void.
► I am aware that in case of false declaration and wilful mis-representation, appropriate penal action may be taken by EPFO against me.

Page 24 28 February 2023

 Eligibility to opt for higher
3 pension
 Employee joined membership of Pension Scheme pre 1 September 2014

S. No. Category Whether option exercised Whether eligible to exercise option to contribute on
prior to 1 September 2014 higher salary by 3 May 2023*
1 Retired before 1 No Not eligible - Para 44(v) of Supreme Court Ruling
September 2014

Yes but application rejected Yes, eligible

by EPFO
[Covered by EPFO Circular dated 29 Dec 2022]

2 Retired on or after 1 Yes, but did not exercise May not be eligible – Para 44(iii) of Supreme Court
September 2014 fresh option within the due Ruling
date under Para 11(4)
No Yes, eligible

[Covered by EPFO Circular dated 20 Feb 2023]

*As per the Supreme Court ruling, the applications were required to be filed within 4 months from the date of the ruling (i.e., on or
before 3 March 2023) but as per the EPFO member login portal as on 28 February 2023, the due date for filing the joint option is
updated as 3 May 2023. However, the EPFO has not yet issued any notification / circular on extension of the timeline
Page 26 28 February 2023
 Employee joined membership of Pension Scheme pre 1 September 2014

S. No. Category Whether option exercised Whether eligible to exercise option to contribute on
prior to 1 September 2014 higher salary by 3 May 2023*
3 Continuing in service Yes but did not file exercise May not be eligible – Para 44(iii) of the Supreme
fresh option by 31 August Court Ruling
2015

No Yes, eligible

[Covered by EPFO Circular dated 20 Feb 2023]

Employee who became a member of Provident Fund Scheme post 1 September 2014 with Monthly Pay exceeding
INR 15,000) --> Not a member of Pension Scheme --> Higher pension benefit not available

*As per the Supreme Court ruling, the applications were required to be filed within 4 months from the date of the ruling (i.e., on or
before 3 March 2023) but as per the EPFO member login portal as on 28 February 2023, the due date for filing the joint option is
updated as 3 May 2023. However, the EPFO has not yet issued any notification / circular on extension of the timeline

Page 27 28 February 2023

 Employees who are interested to exercise the option to contribute on higher salary

Joint option to be exercised with the employer

Diversion of funds upon exercise of option

Provident Fund Pension Fund

Employee’s share Deductions : Additions :
► 1.16% of Monthly Pay exceeding INR 15,000 ► Funds deducted from employee’s share of
from 01 September 2014 till 3 May 2023 provident fund added to common pension
► Interest on the above credited fund

Employer’s share Deductions : Additions :

► 8.33% Monthly Pay less 8.33% of wage ceiling ► Funds deducted from employer’s share of
from date of joining till date of exit provident fund added to common pension
► Interest on the above credited fund

Upon exercise of option, monthly pension on retirement till death = Higher salary x Pensionable service / 70

*Subject to acceptance of option by the EPFO

Page 28 28 February 2023
4 Case studies
 Ms. A started working and became a member in Jan 2011 at the age of 21 years

► In 2011, she was earning Basic Salary of INR 16,000 p.m. and received/ is expecting to receive 5% yearly increments throughout
her service period till retirement at 58 years
► Interest rate on Provident Fund Scheme has been assumed to be 8% p.a.
► Interest rate on deposits and discounting rate applied post retirement has been assumed to be 7% p.a.

Contributed to Pension Contributed to Pension

Particulars Scheme on wage ceiling Scheme on higher salary
(INR) (INR)
Provident Fund corpus available for withdrawal from Provident Fund at 58
1,50,95,031 1,15,25,440
years
Estimated monthly pension from Pension Scheme post retirement
(Considering Pensionable salary as average salary for 60 months and 7,500 42,127
pensionable service restricted to 35 years)
Interest income per month from fixed deposits @ 7% per annum 88,054 67,232

Monthly income post retirement 95,554 109,359

Life expectancy of 70 years - Value of future cash flows as on 58 years
1,58,24,333 1,56,21,868
(monthly income and Provident Fund corpus)
Life expectancy of 90 years - Value of future cash flows as on 58 years
1,62,42,976 1,79,73,357
(monthly income and Provident Fund corpus)

Page 30 28 February 2023

 Mr. Y started working and became a member in Jan 1996 at the age of 31 years

► In 1996, he was earning Basic Salary of INR 8,000 p.m. and received 5% yearly increments throughout his service period till
retirement at 58 years on 31 December 2022
► Interest rate on Provident Fund Scheme has been assumed to be 8% p.a.
► Interest rate on deposits and discounting rate applied post retirement has been assumed to be 7% p.a.

Contributed to Pension Contributed to Pension

Particulars Scheme on wage ceiling Scheme on higher salary
(INR) (INR)
Provident Fund corpus withdrawal at 58 years 27,54,123 21,98,917
Estimated monthly pension from Pension Scheme post retirement
(Considering Pensionable salary as average salary for 60 months and 6,214 10,714
pensionable service restricted to 35 years)
Interest income per month from fixed deposits @ 7% per annum 16,066 12,827
Monthly income post retirement 22,280 23,541
Life expectancy of 70 years - Value of future cash flows as on 58 years
33,58,401 32,40,784
(monthly income and Provident Fund corpus)
Life expectancy of 90 years - Value of future cash flows as on 58 years
37,05,278 38,38,851
(monthly income and Provident Fund corpus)

Page 31 28 February 2023

5 Next steps
 Next steps

Eligible employees to decide whether or not to opt for higher pension

Interested employees and company to file the joint option form with the EPFO on
or before 03 May 2023*

Interested employees and company to follow further guidelines from EPFO on the
procedural requirements, as may be notified

*As per the Supreme Court ruling, the applications were required to be filed within 4 months from the date of the ruling (i.e., on or
before 3 March 2023) but as per the EPFO member login portal as on 28 February 2023, the due date for filing the joint option is
updated as 3 May 2023. However, the EPFO has not yet issued any notification / circular on extension of the timeline

Page 33 28 February 2023

 Important points

► This presentation is based on the provisions of the Provident Fund Act and the related schemes thereto, the judicial
precedents and the EPFO circulars as on date.
► The contents of this presentation is for informational purposes only.
► Employees should do their own due diligence and take an informed decision on whether to opt for higher pension.
► Joint consent from employer does not guarantee that the employee will be eligible for higher pension benefit. This
will depend on the final guidelines to be issued by the EPFO. If the employee is eligible for higher pension, the
amount will be transferred from Provident Fund Scheme to Pension Scheme with interest till date. To this extent,
lump-sum withdrawal available under Provident Fund Scheme will reduce.
► The employer does not provide any guarantee on benefits available to employees under Provident Fund Scheme or
Pension Scheme.
► The employer will not be responsible for any loss or disadvantage to any employee upon exercising this joint option
under the Pension Scheme.
► This document solely for the information of company and its employees. It should not be quoted in whole or in part,
disclosed or made available to external parties or referred to in any document, without prior written consent. It is not
intended to be relied upon by third parties.

Page 34 28 February 2023

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