The Employees’ Pension Amendment (Scheme), 2014 rules that set a monthly cap on the maximum pensionable salary (base pay plus dearness allowance) at 15,000 rupees were upheld by the Supreme Court on Friday.
However, the court read down a few of the plan’s provisions.
The remarks were made by a panel of judges that included Chief Justice U U Lalit, justices Aniruddha Bose, and Sudhanshu Dhulia as it was hearing appeals from the Employees’ Provident Fund Organisation (EPFO) and the Union government challenging the rulings of the high courts in Kerala, Rajasthan, and Delhi that nullified the 2014 amendments.
Using a government notification, the Employee Pension Scheme’s Sections 11(3) and 11(4) were changed on August 22, 2014. On September 1st of that year, it became operative.
Section 11(4) gave employees the option to increase their pensionable compensation over the limit of $15,000 while Section 11(3) increased the maximum pensionable salary limit from $6,500 to $15,000.
However, employees could only use Section 11(4) if they announced their decision by September 1, 2014 (extendable by an additional six months), and paid an additional contribution that was equal to 1.16% of their pay.
“We therefore hold and instruct that the clauses in the notification no….dated August 22, 2014 are legitimate and enforceable. We have interpreted some terms of the scheme as applying in the instances of current members of the fund, the highest court ruled.
The bench highlighted that the maximum pensionable wage will remain at $15,000 per month following the modification, up from the previous cap of $6,500 per month.
The court ruled that the current employees who as of September 1, 2014, had not taken advantage of the second option under section 11(4) (pensionable pay above 15,000) had four months to do so.
Due to a lack of clarity on the subject following the decisions of the several high courts, eligible employees who were unable to join the programme by the cut-off date will be given another chance, it noted. Those who took early retirement will not be eligible for this option.
The bench declared unenforceable the clause requiring workers to contribute an additional 1.16% of their salaries above 15,000 rupees.
Employees who choose an expanded pensionable wage must make the 1.16% payment, the court ruled, even if the provision was temporarily delayed for six months as a “stop gap measure.”
For a period of six months, it ruled, “we delay the implementation of this part of our decision so that the legislature may examine the necessity of proposing suitable legislative revisions on this point.”
On the “stop-gap measure,” it said that “the abovementioned sum shall be adjustable on the basis of the adjustment to the scheme that may be made.”
