EPFO Cannot Deny Higher Pension To Employees Due To Bulk Or Delayed Contribution: Kerala HC

What would you do if you had contributed to the employees’ pension fund scheme for a higher pension but have been denied the payment after retirement?

In a recent case hearing, the Kerala High Court held that the Employees’ Provident Fund Organisation (EPFO) cannot deny higher pensions to employees. Justice Murali Purushothaman ordered EPFO not to deny higher pensions to employees just because the employer delayed or made the contribution in a lump sum.

As per the rule, employer and employee contribute equally to the EPFO, which is 12 per cent of the basic salary and dearness allowance. An employee’s entire contribution goes to the EPF. In contrast, an employer’s contribution is divided between the Employee Provident Fund (EPF) and Employee Pension Scheme (EPS), 3.67 per cent and 8.33 per cent, respectively. The prevalent statutory or wage limit thresholds were Rs 5,000, 6,500, or Rs 15,000 for these deductions.

The Case

Initially, the company deducted the pension contribution based on their actual salary. However, this was stopped after the government ordered Thiruvananthapuram Regional Co-operative Milk Producers Union Ltd (TCMPU) to restrict their contribution to the statutory limit.

As per the rule, the petitioners who had been continuing in service since September 1, 2014, were allowed to opt for a higher pension. So, they exercised their options.

They retired during 2020-22, but when it came to pension payment by EPFO, they were denied higher pensions because the employer (TSMPU) paid contributions only up to the statutory limits during this period.

So, the employees approached the Kerala High Court. Four retired employees of TCMPU, a co-operative society, filed a writ petition against EPFO, seeking a pension based on their actual contribution amount. The petitioners also contended that a higher pension cannot be denied on the ground that the employer made the contribution remittance in a lump sum.

Reportedly, at the time, the court asked TCMPU to deposit the money deducted more than the statutory limit in a separate account in a nationalised bank. The court also directed the co-operative society to deposit the money in the EPFO account with 9 per cent of interest if the case is ruled in favour of the employees.

Court’s Observation:

The court noted, “According to the petitioners, contributions under the EPF Scheme, 1952, at the rate of 12 per cent, were regularly made by the petitioners, with an equal contribution by the employer, based on the actual salary drawn, until retirement, except for a brief period from April 2004 to October 2006, and from October 2007 to February 2008”.

The court also observed that the employer made the contribution later in a lump sum and EPFO received it. “Admittedly, the Employees Provident Fund Organisation has received contributions from both employees and employer under Para 26(6) of the EPF Scheme, 1952, for the period 2004– 2005 to 2007–2008”.

The Judgement:

After hearing the argument, the court ordered, “The petitioners and the 4th respondent having complied with the requirements under the said paragraph, and the Employees Provident Fund Organisation accepted the contributions, the 2nd respondent cannot deny the petitioners the benefit of higher pension”.

Here, respondent number 4 is TCMPU, and respondent number 2 is the regional provident fund commissioner, Thiruvananthapuram.

The court ordered that the petitioners are entitled to a higher pension on actual wages and directed EPFO to give pension to the petitioners within three months.