THE government is considering an ordinance to get more organisations to join the Employees’ Provident Fund Organisation (EPFO), bringing additional 45 lakh workers within the coverage of a formal retirement benefit scheme.
At present, all non-government establishments having more than 20 employees have to park the retirement savings of their employees with the Employees’ Provident Fund (EPF), the flagship retirement benefit scheme of the EPFO. A small portion of the employee’s saving also goes to another scheme run by the EPFO, the Employees’ Pension Scheme (EPS).
The government wants to bring down the threshold limit to establishments having more than 10 employees. This will add another 45 lakh subscribers to EPF’s current about four crore members.
Since the government does not have the time to move a formal Bill to effect the change in the current session of Parliament, it is considering an ordinance. The government is keen to bring an amendment and ensure social security cover for more workers at the earliest. However, it is unlikely that the proposal, which is with the Cabinet, will be ready for formal presentation before Parliament in the on-going session. The government is keen to amend the EPF Act before the elections next year, and is mulling over the ordinance option. The government can make changes to law through ordinance when Parliament is not in session but it would have to be approved subsequently by Parliament.
The Central Board of Trustees (CBT), the core committee of the EPFO, had approved in August the suggestion to lower the threshold limit. While benefits of expanding the scope of the scheme are acknowledged, doubts have been raised whether the EPFO is ready for the same. The finance ministry is concerned how the EPFO, that is already facing deficit, will manage social security of another 45 lakh employees.
Although no annual evaluation of the pension fund has been put on record by the EPFO since 2004, the EPS is believed to be running a deficit of about Rs 45,000 crore. Deficit is a measure of excess of liabilities over assets. Lowering the threshold limit of coverage, it is feared, can cause the deficit in the pension fund to increase sharply. The official added that the finance ministry was also reluctant as wider coverage would mean increase in the dole given out by the government through its contribution to the pension scheme.
At present, all non-government establishments having more than 20 employees have to park the retirement savings of their employees with the Employees’ Provident Fund (EPF), the flagship retirement benefit scheme of the EPFO. A small portion of the employee’s saving also goes to another scheme run by the EPFO, the Employees’ Pension Scheme (EPS).
The government wants to bring down the threshold limit to establishments having more than 10 employees. This will add another 45 lakh subscribers to EPF’s current about four crore members.
Since the government does not have the time to move a formal Bill to effect the change in the current session of Parliament, it is considering an ordinance. The government is keen to bring an amendment and ensure social security cover for more workers at the earliest. However, it is unlikely that the proposal, which is with the Cabinet, will be ready for formal presentation before Parliament in the on-going session. The government is keen to amend the EPF Act before the elections next year, and is mulling over the ordinance option. The government can make changes to law through ordinance when Parliament is not in session but it would have to be approved subsequently by Parliament.
The Central Board of Trustees (CBT), the core committee of the EPFO, had approved in August the suggestion to lower the threshold limit. While benefits of expanding the scope of the scheme are acknowledged, doubts have been raised whether the EPFO is ready for the same. The finance ministry is concerned how the EPFO, that is already facing deficit, will manage social security of another 45 lakh employees.
Although no annual evaluation of the pension fund has been put on record by the EPFO since 2004, the EPS is believed to be running a deficit of about Rs 45,000 crore. Deficit is a measure of excess of liabilities over assets. Lowering the threshold limit of coverage, it is feared, can cause the deficit in the pension fund to increase sharply. The official added that the finance ministry was also reluctant as wider coverage would mean increase in the dole given out by the government through its contribution to the pension scheme.
