The central government has recently amended the Employee Pension Scheme (EPS) of 1995.
Under these new rules, employees who have contributed to the scheme for less than six months will now be eligible for withdrawal benefits. This change will benefit more than 7 lakh employees every year.
Overview of the Employee Pension Scheme
EPS Contributions The Employee Pension Scheme was established to provide monthly pensions to private sector employees after retirement.
Contributions under the EPS are part of the Employee Provident Fund (EPF) Scheme, 1952:
Employees contribute 12% to the EPF.
Employers contribute 12%, with 8.33% going to the EPS, 3.67% to the EPF, and 0.50% to the Employees’ Deposit Linked Insurance (EDLI) scheme.
Pension Benefits Employees can start receiving their pension from the EPS after reaching the age of 58.
The maximum monthly contribution from an employee to the EPS is Rs 1,250. If an EPS member passes away, their family (spouse and children) receive a ‘family pension’.
Changes in Withdrawal Rules
Previous Withdrawal Rules
Previously, the withdrawal benefit was calculated based on completed years of contributory service and the salary on which EPS contributions were paid.
Employees had to complete at least six months of service to qualify for any withdrawal benefits. As a result, those with less than six months of service were not eligible for any benefits.
New Withdrawal Rules
The new amendment allows employees with less than six months of service to receive withdrawal benefits.
This change will benefit EPS members who have not yet reached 58 years of age by June 14, 2024.
During the financial year 2023-24, around 7 lakh claims for withdrawal benefits were rejected due to less than six months of contributory service. This amendment will now make them eligible for benefits.
Impact of the Amendments
Proportionate Withdrawal Benefits
The government has also amended the rules to consider each completed month of service for providing proportional withdrawal benefits.
This change will benefit more than 23 lakh EPS members annually. Previously, service periods of less than six months after each full year were ignored in the calculation, leading to reduced benefits.
Example of Benefit Calculation
For instance, an EPS member with 2 years and 5 months of contributory service and a salary of Rs 15,000 per month was earlier entitled to a withdrawal benefit of Rs 29,850.
Under the new rules, the member will now receive Rs 36,000, ensuring a more accurate calculation and proper payment of benefits.
These changes aim to provide fairer and more comprehensive benefits to all EPS members, ensuring that even those with shorter service periods receive due support.
