The Hidden Truth Behind EPS ’95 Deficit

This is from the pen of G. Srinivasa Rao, a senior EPS 95 pensioner Analyst from Andhra Pradesh

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” The real meaning” or rather “hidden meaning” of Actuarial Deficit often quoted by
EPFO with regard to EPS,’95”.

A householder, if he says that there is a deficit of 10,000/- in his monthly budget, we can understand that as an example he is earning 50,000/- whereas the expenditure is 60,000/- per month. This is the common understanding for any layman. Can we apply the same conclusion in case of “deficit” always quoted by EPFO with regard to EPS,’95 fund? Certainly with a resounding “NO”.

Proof:

As per the Actuarial valuation report for the period ending 31st December, 2014 (instead of 31st March, 2015)

Special report due to implementation of Minimum 1,000/- from September, 2014.

It is another matter that the Ministry of Finance is providing Budgetary support. But EPFO wants to know the impact (deficit in EPFO parlance) if it implements the same on its own “without Budgetary support”.

As quoted in the Actuarial Report:

a) Net liability without Budgetary support……………2,46,581.32 Cr
b) Net liability with Budgetary support…………………2,36,665.12 Cr
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Difference………………………………………………………………..9,916.20 Cr
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Now we generally come to the conclusion that Budgetary support is to the extent of 9,916.20 Cr per annum to implement 1,000/- Minimum Pension.

But the actual expenditure on average per year is 900 Crores only as per the Annual Reports from 2014-2015 to 2023-2024 (10 years)

Then why the Deficit is shown by Actuary as 9,916.20 Cr which is 10.18 times of 900 Crores?
What is the definition of “Deficit” in EPFO parlance?

The definition of Deficit in EPFO parlance is “deficit in investments” to earn sufficient interest to pay the 1) Pension, 2) Withdrawal Benefit, 3) Provision for future payments of Pension and Withdrawal Benefit”.

Employees’ Family Pension Scheme, 1971 is replaced by Employees’ Pension Scheme, 1995. While EFPS,’71 provides Pension to the nominee in the event of death of the employee while in service, EPS,’95 in addition provides pension to the employee who retires also and even on disability. Both are subject to actuarial valuation annually. The closing Corpus of EFPS,’71 is taken as the initial Corpus of EPS,’95.

Under EFPS,’71:-
1) There was/is payment of Pension to the nominee in the event of the death of the employee while in service.
2) Payment of Withdrawal Benefit to those who left service mid-way.
3) Payment of Withdrawal Benefit to those who survived upto retirement.

Under Employees’ Pension Scheme, 1995:

1) Payment of Pension to the nominee and also in addition to two children below the age of 25 years upto 25 years in case of death of the employee while in service.
2) Payment of Pension in case of disablement.
3) Payment of Pension either due to early retirement or on superannuation.
4) Payment of Withdrawal Benefit to those who have not contributed for a minimum period of 10 years.

Thus the above benefits were provided to Crores of employees under both the Schemes for the past more than 53 years, 1 months (01-03-1971 to 31-03-2024)

But, “surprise of surprise”, the entire contributions both by the employees and Government, for the past 54 years, 6 months under “both the Schemes” still lying in investments as per the Annual Reports of EPFO ( EFPS,’71 and EPS,’95)

1) Total Contributions by Employees and
Government from “01-03-1971 to 31-03-2024”
(53 years, 1 month)……………………………………………………..5,96,639.73 Cr (100%)
2) Corpus as on 31-03-2024………………………………………….8,88,269.01 Cr (167.17%)
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Excess………………………………………………………………………….2,91,629.28 Cr (67.17%)
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Lakhs of employees, if not more than Crore who were paid the above benefits died for the past 53 years and one month (01-03-1971 to 31-03-2024). Then who their contributions are still “lying with EPFO in investments”?

Is it not a million dollar question?

Association leaders who claims of presenting “Power Point Presentation” before CPFC, Secretary (Labour & Employment), Minister for Labour & Employment, Minister for Finance, ever shown this
“eternal truth” in their presentation? It is only for them to introspect.

ALSO, READ AGAIN

” EPFO’s uninterrupted “misguiding spree” of the Hon’ble Supreme Court”

In the just received copy of the affidavit from Sri Parveen Kohliji, filed by EPFO before the Hon’ble Supreme Court inconnection with the appeal filed against the judgement of Hon’ble Punjab & Haryana High Court of 28th March, 2025, it was stated on Page 18 & 19 as follows:

” The second error made by the Kerala High Court was that relying upon R.C. Gupta, it permitted exercise of second option (option under proviso to para no: 11(3)) even for those who who had exited the pension scheme. The High Court overlooked the fact that R C Gupta had held that the second option could be exercised anytime during the membership of the scheme, but it could not permit exercising the second option “beyond the membership”.

Concerned para of the Judgement of the R C Gupta:

Para No. 11 is split into three parts for easy understanding:

11 The above apart in a situation where the deposit of the employer’s share at 12% has been on actural salary and not on the ceiling amount, we do not see how the Provident Fund Commissioner could have been aggrieved to file the L.P.A. before the Division Bench of the High Court. (Part I of the para)

11. All that the Provident Fund Commissioner is required to do in the case is an adjustment of accounts which in turn would have benefitted some of the employees. (Part II of the Para)

(meant for those who are in service at the time of judgement)

11 At best what the Provident Fund Commissioner could do and which we permit him to do under the present order is to seek a return of all such amounts that the concerned employee may have taken or “withdrawn” from their Provident Fund Account before granting them the benefit of the proviso to Clause 11(3) of the Pension Scheme. Once such a return is made in whichever cases such return is due, consequential benefits in terms of this order will be granted to the said employees.

( In case of retired employees who retired on or before 31-08-2014)

meaning of “withdrawn”

Para No. 69 of Employees’ Provident Fund Scheme, 1952:

69 Circumstances in which accumulations in the Fund are payable to a member. — (1) a member may “withdraw” the “full amount” standing to his credit in the Fund–
(a) on retirement from service after attaining the age of 55 years:

(Hence, the meaning of “withdrawn” carry the same meaning both in Para 11 of the judgement of R C Gupta and also in Para No. 69 of EPFS,’52)

Further, an employee need not compulsorily withdraw the amount under EFPS, ’52 on retirement. He may keep the same for another “three years” to get interest as per the rates declared by EPFO from year to year.

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