Regulatory Alert: Extension in the due date for opting for higher pension under Employees Pension Scheme

Executive Summary

Employees Provident Fund Organisation (EPFO) issued a circular dated 20 February 2023 providing guidelines on the procedure for eligible employees to submit an application for higher pension under the Employees’ Pension Scheme, 1995 (EPS).

This is in response to the direction issued by the Supreme Court (SC) of India in its judgment dated 4 November 2022, wherein the SC provided a window of 4 months in which the eligible employees can opt for higher pension under EPS. This window was set to expire on 3 March 2023. However, EPFO has recently extended the timeline for opting for a higher pension to 3 May 2023.

The circular issued by EPFO in compliance with the SC judgement, provides that the following class of employees may submit a joint option (along with their employers) to opt for a higher pension:

a. Employees and employers who had contributed to the Employees’ Provident Fund Scheme on salary exceeding the prevalent statutory ceiling

b. Such employees had not exercised the joint option within the prescribed timelines provided earlier

c. Such employees were members of EPS prior to 1 September 2014 and continued to be a member on or after such date


Before deciding on whether or not to opt for a higher allocation of contribution to EPS in line with the directions as provided in the circular issued by EPFO, let's understand the background leading to the recent circular:

a. As per the Employees’ Provident Fund Act, 1952, the employee’s contribution to Provident Fund (PF) is 12% of the PF wages. The employer makes a matching contribution of 12% of PF Wages.

b. On 16 November 1995, EPS came into effect, providing that 8.33% of the employer’s contribution should be allocated towards the EPS and the balance 3.67% of the employer’s contribution will continue to flow towards the corpus of PF accumulation.

c. The EPS also provided for a maximum pensionable salary of INR 5,000 which was later increased to INR 6,500.

d. With Effect from Nov 1996, a proviso to para 11(3) under EPS was added giving an option to the employer and employee for contribution on salary exceeding INR 6,500.

e. EPFO-wide notification dated 22 August 2014 again amended the EPS. A few relevant amended provisions are as follows:

  • The amount of pensionable salary was increased to INR 15,000 per month.
  • Proviso providing an option to the employees and employer to contribute to EPS on higher salary was removed w.e.f 1 Sep 2014.
  • Para 11(4) was added providing that existing members as on 1 September 2014, who had been contributing on salary exceeding INR 15,000, were allowed to contribute to EPS on salary exceeding INR 15,000, on exercising a fresh option. This option was required to be exercised by the member within 6 months from 1 September 2014.

f. Orders of Kerala High Court in the case of P. Sasikumar & Others vs. Union of India (UOI) passed in October 2018 and of Delhi High Court (Bhartiya Khadya Nigam Karamchari Sangh and Anr. vs. Union of India and Ors.) passed in May 2019 moved to restore the earlier option provided to employees. This was challenged by EPFO in the SC. 

g. SC Judgement: SC deliberated the matter raised and discussed by several high courts on this matter and finally on 4 November 2022, passed its judgment in the case of the Employees’ Provident Funds Organization & ANR., etc. vs. Sunil Kumar B. & ORS, etc. The SC’s order held the following basis for the category of employees:

  • Employees who had retired prior to 1st September 2014 without exercising any option for a higher pension, would not be entitled to the same now.
  • Employees who had exercised the option for a higher pension and continued to be in service as of 1 September 2014, will be guided by the amended provisions of the pension scheme.
  • Employees who retired before 2014, and their joint option request was denied by the Authorities, are entitled to submit a joint option and get a higher pension.
  • Employees who did not exercise the option earlier can opt for enhanced contribution within 4 months of the SC order (The last date being 3 March 2023).
  • PF Authorities are to implement the directives in order within 8 weeks.

In line with the above SC Ruling, EPFO has notified two circulars dated 29 December 2022 and 20 Feb 2023, providing directives to its officers for compliance with the above SC order, which provides the manner in which the eligible employees may apply to the concerned regional office to file the joint option to opt for higher pension.

Way forward

With higher allocation towards EPS, the contribution towards EPF corpus which is eligible for lumpsum withdrawal will reduce. Thus, a detailed analysis may be required giving regard to an individual personal situation and to arrive at the best possible model.

This additional time provided by EPFO for opting for a higher pension is a relief to the members of EPS who are confused regarding exercising this option. More directions on the method of calculation of pension under this scheme are also expected to be rolled out by EPFO.

The employers should roll out communication to the employees to increase awareness of this option to opt for a higher pension from EPFO post-retirement.

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