New Pension Scheme to EPF switch: Legislation on the way

| March 5, 2015

New Pension Scheme to EPF switch: Legislation on the way

Workers who wish to choose between the Employees’ Provident Fund Organisation and the New Pension Scheme may have to wait as the government will need to make enabling legislation for the switch.

“Under current norms, firms with over 20 workers are mandated to contribute to the EPFO to provide social security. Not doing this is in default of the Act and can lead to a penalty as well as imprisonment,” said a government official, adding that to allow for such a choice, amendments will have to be made.

At present, companies can open NPS accounts for their workers or individuals can open independent accounts under the scheme, but these contributions are over and above the mandatory deductions for the EPFO.

But pointing out that EPF has “hostages” rather than “clients”, finance minister Arun Jaitley had said in the Budget 2015-16.

“With respect to the Employees Provident Fund (EPF), the employee needs to be provided two options. Firstly, the employee may opt for EPF or the New Pension Scheme (NPS). Secondly, for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution,” he had announced. The ministry of labour and employment is already finalising amendments to the EPF and Miscellaneous Provisions Act, 1952. Sources said fresh amendments will have to be drafted.

“The Budget announcements are neither covered under the planned amendments to the EPF Act nor under the proposed Small Factories Bill,” said the official.

At present, the labour ministry is finalising amendments to expand EPFO coverage by halving the threshold for eligible establishments from those employing 20 workers or more to 10 workers. The ministry is also working on a Small Factories (Regulation of Employment and Conditions of Services) Bill that proposes to move out workers from factories employing less than 40 workers from the EPFO to private insurance plans.

Current norms

* At present, companies can open NPS accounts for their workers or individuals can open independent accounts under the scheme, but these contributions are over and above the mandatory deductions for the EPFO

* Under current norms, firms with over 20 workers are mandated to contribute to the EPFO to provide social security. Not doing this is in default of the Act and can lead to a penalty as well as imprisonment.

Source: Financial Express

Category: News, NPS

About the Author ()

Comments are closed.