Employees and pensioners in the Supreme Court on Thursday tore into the controversial amendments on “determination of pensionable salary” introduced into the Employees Pension Scheme (EPS) of 1995.
Appearing before a Bench led by Justice U.U. Lalit, senior advocate Jayant Muth Raj, appearing for employees of Kerala district cooperatives, trashed the claims made by the Centre and the Employees Provident Funds Organisation (EPFO) in court that the EPS-1995 was facing “huge financial difficulties”.
“There is surplus money in the scheme. Whatever they (government and EPFO) are are earning as interest is more than what they are paying as monthly pension,” Mr. Muth Raj submitted.
Mr. Muth Raj said the dispute revolved around the controversial amendments made to Clause 11(3) of the EPS-1995. The changes introduced in the scheme had forced pensioners and employees from all walks of life move court, apprehensive that the amendments have dashed their hopes of a secure retirement. The Kerala High Court had struck down the amendments, following which the EPFO had appealed in the Supreme Court.
Mr. Muth Raj drew the court’s attention to how the pensionable salary was originally an average of 12 months’ pay before the date of the employee’s exit from the EPS. The amendments had extended the period of calculation of average salary from 12 months to 60 months.
“This is detrimental to the interests of the employees and takes away their vested right to a decent pension,” he argued.
He argued that salaries were usually the highest during the last year before retirement.
An extension of the period of calculation of average pensionable salary from 12 to 60 months would see a corresponding depletion in the pension, he contended.
“The difference is huge. There would be 40% difference in the salary and at least 20% change in the pension,” the senior advocate submitted.
On the increase in the maximum pensionable salary cap from ₹6,500 to ₹15,000, Mr. Muth Raj pointed out that the amendments said only employees, who were existing EPS members as on September 1, 2014, could continue to contribute to the pension fund in accordance with their actual salaries. They were given a window of six months to opt for the new pension regime.
However, the changed pension regime introduced through the amendments meant that someone who became an EPS member after September 1, 2014 would not get pension on par with his or her actual salary.
“That is, even if your salary is ₹1 lakh, you will get pension only for a salary ₹15,000,” advocate Nishe Rajen Shonker, an advocate for pensioners, explained.
Mr. Muth Raj trained the spotlight on how the the amendments create an additional obligation for employees whose salaries exceeded the ₹15,000 ceiling. He said they had to contribute a further 1.16% of their salary in addition to their Employees Provident Fund contribution.
“The 1.16% contribution is contrary to the provisions of the Employees Provident Fund Act itself. Contributions should be made either by the employer or the Centre. The Act had never contemplated contributions from employees,” Mr. Muth Raj contended.
