Great betrayal in the form of EPS,’95

This is from the pen of Shri G. Srinivasa Rao, a senior EPS 95 pension analyst.
“Great betrayal in the form of EPS,’95”

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When an employee dies while in service among Central or State Government employees , the Government comes to the rescue of the family of the deceased by providing a job under the Breadwinner Scheme and when there is no one for employability, other cash benefits are provided.

The same is the case with the employees of EPFO. Employees working in Public Sector Undertaking or Government establishments are only counterparts of the above Central and State employees.

While Pension is applicable to Government employees, Contributary Provident Fund is the alternative for employees of Government Undertakings and Establishments. Here, the alternative is Employer’s Contribution against Pension in the form of the Old Pension Scheme (OPS).

Till the implementation of EPS,’95 w.e.f. 16-11-1995, the Employer’s Contribution is credited to the Employee’s Contribution and after adding interest as per the rates declared by EPFO from year to year the amount is paid on retirement.

With the introduction of EPS,’95, part of the Employer’s contribution upto Ceiling is diverted towards EPS,’95 which is being run of the “Principles of Insurance”. This means an employee will get Pension as per “Defined formula” irrespective of the contribution he/she paid.

In EPS, ’95 parlance and general also this is called the “Defined Contribution-Defined Benefit” formula.

As an example an employee contributes from 16-11-1995 to 28-02-2025 along with interest as declared by EPFO from year to year 8,95,536/- (calculation sheet available) whereas he/she gets only 4,180/- as Monthly Pension when the contribution is exactly on Ceiling from time to time during the above period.

Had there been no EPS,’95, the employee gets the above amount as settlement on retirement. EPFO is getting 8% interest on Long Term Investment of EPS,’95 monies as per the Actuary.

Then the interest on the above 8,95,536/ comes to 7,164/- per month. Thus the above Pension is only 58.35% of 7,164/-. For this EPFO”s justification is the Scheme is being run on the principles of Insurance, i.e., Pension is provided to the family of the deceased while in service not only to nominee and also along with two children upto the age of 25 years.

This burden is borne by the above employee who contributed 8,95,536/- whereas this is not the case with Central and State Government employees or especially with the employees of EPFO. Then why should employees of Government Undertaking or Establishment who are only counterparts to the employees of Central and State Government share this burden?

Any new scheme introduced should give more benefits but in case of EPS,’95 it is the reverse. And for this EPFO cites the method of “Principles of Insurance”.

Surprisingly, EPFO never published that the Scheme is run on “Principles of Insurance”. It never mentioned this when it released a News Paper advertisement on 5th January, 1995 to remove misconceptions.

More surprisingly it was nowhere mentioned in the judgement of 11th November, 2003 by the Hon’ble Supreme Court which upheld the Scheme. It only surfaced during the arguments in connection with the judgement of 4th November, 2022.

Thus EPFO kept this under wraps for many years.

The above analysis especially applies also to the employees of Private Establishments most of whom are not eligible for Higher Pension.

Then is it not a “Great Betrayal”?

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