What Does the 2016 EPF Amendment Mean for Your Unclaimed PF Amounts?

Friends,

Please find attached the notification dated 11.11.2016 amending para 72(6) of the EPF Scheme. According to the update, unclaimed PF amounts will now be transferred to an inoperative account only after retirement from service, upon reaching the age of 55, or after permanently migrating abroad.

Thanks

Thank you, sir, for your information. It means that if an employee is retired or has gone abroad and hasn't claimed PF accumulation for more than 3 years, they will not receive interest.

Thanks

Dear Sir,

According to the notification, all the members will receive interest from 11-11-2016, except for those who have retired or migrated but have not withdrawn the PF amount.

Thanks,
Vidyadhar Bhat

When someone retires at the age of 60 years and does not withdraw his PF for the next two to three years, will his PF accrue interest during this period?

Dear Sir,

What happens if someone resigns from their job and does not work anywhere else or withdraw their PF amount for two or three years? Will they receive their PF interest during this period?

Conditions for EPF Account Becoming Inoperative

As per this notification, an EPF account becomes an Inoperative Account (i.e., interest need not be credited to the member's account post 36 months) only under the following conditions:

1) On retirement any time after the member attains the age of 55 years; or
2) Migrates permanently abroad; or
3) On the death of the member.

The period of 36 months would start from the above date. In all other cases, the PF account will remain active (despite no contributions), and interest needs to be calculated and credited to the member’s account on the monthly running balance.

Clarification on EPF Withdrawal Post-Retirement

Thank you for your valuable update on the EPF account transfer to an inoperative account by the department. I would like to seek clarification on the following situation:

A person retired in October 2014 after working for a period of 22.5 years and has not yet applied for EPF withdrawal or pension. It was advised that the EPF department would provide up-to-date interest for three years after retirement, following which the account would be declared inoperative.

In accordance with this advice, the retired employee has not yet applied for withdrawal or pension and intends to do so before the completion of three years after retirement to cover expenses for their children's marriage. I seek your guidance on whether this approach is appropriate or if there may be any potential issues. However, upon logging into the UAN, it is noted that the EPF department has been updating the interest for the past two years or so after retirement.

Kindly advise on how to proceed with the withdrawal process. Specifically, whether it is advisable to wait for the full three years after retirement.

I eagerly await your valuable response.

With Kind Regards,

K. Bhatia

[Email Removed For Privacy Reasons]

Retirement Age and PF Account Interest

The retirement age will be defined as per the company policy. If the company or establishment decides the retirement age as 60 years, the member will receive interest up to 63 years, and later, the account will become inoperative. From the date of the member's death, if the amount is not withdrawn by the nominee, the account will accrue interest for the next three years from the date of death. Similarly, if the member migrates out of India and does not withdraw the PF amount, the account will accrue interest for three years from the date of migration.

Accordingly, the establishment will need to register the retirement age with the RPFC. If the establishment's retirement age is below 55 years, interest will be paid up to 55 + 3 = 58 years.

Thanks,

Vidyadhar Bhat

Queries Regarding Notification on Inoperative Accounts

We have received the notification regarding interest on inoperative accounts. We have studied it and have the following queries. Upon confirmation or clarification, we will finalize the changes.

1) If the normal retirement age is 58/60, and an employee leaves the organization after the age of 55 but before the retirement age, will it be treated as a resignation? Will interest be credited to their account?

2) If employees become inoperative between April 2016 and October 2016 (as of 1st November), will interest be credited to such accounts from April 2016 or from November 2016?

3) In the case of voluntary retirement before and after the age of 55 years.

4) If any arrears or contributions come after the settlement and are not claimed by the member for more than 36 months, will they receive interest?

5) Applicability of interest on erstwhile inoperative accounts from 11.11.2016. Will the accounts in the process of becoming inoperative from November 2016 be given interest and not be transferred to inoperative accounts? Will the accounts that have already become inoperative remain inoperative?

Regards

Answers to Your Queries

1) If the normal retirement age is 58/60 and an employee leaves the organization after reaching 55 years of age but before the retirement age, will it be treated as a resignation or not? Will interest be credited to his account or not?
Ans: It will be treated as a resignation. If the PF amount is not withdrawn, the employee is entitled to interest up to 61/63 years.

2) If an employee becomes inoperative between April 2016 and October 2016 (as of 1st November), will interest be credited to such accounts from April 2016 or from November 2016?
Ans: The member is entitled to interest from November 2016 onwards.

3) In the case of voluntary retirement before 55 years and after 55 years.
Ans: If the PF amount is not withdrawn, the employee is entitled to interest up to 61/63 years.

4) If any arrears, dues, or contributions come after the settlement and are not claimed by the member for more than 36 months, will it accrue interest or not?
Ans: The treatment will be as per the retirement date of 58/60.

5) Regarding the applicability of interest on erstwhile inoperative accounts from 11.11.2016 or on the accounts in the process of becoming inoperative from November 2016, will they receive interest and not be transferred to an inoperative account? Will the accounts that have already become inoperative remain so?
Ans: As per the notification, if the member has already retired for more than 3 years, the account will be treated as inoperative and continued. No inoperative account will be created beyond the retirement age plus 3 years.

Regards, Vidyadhar Bhat

Dear All,

I came to know that if an employee resigns or leaves for any reason other than death or going abroad permanently at age 50, and as per company policy, the retirement age is 60, in this case, if the employee continues to earn interest until the age of 63 but has not yet claimed the amount, will the account become inoperative?

Is this interpretation correct?

Sahdev

With reference to the notification dated 11th November 2016, we request clarification on the following points:

1. Do we need to credit interest to members who have resigned and not transferred/withdrawn their PF balance, and whose age as of 11th November 2016 is 58 years or more?

2. For those members who have taken up employment abroad, can they be considered "permanently migrated abroad"? Should we collect any documentary evidence proving migration abroad? How do we prove that a member has permanently migrated abroad or gone abroad for employment?

3. In the case of resigning employees, can a letter be obtained from such employees stating that they will transfer their PF to their new establishment within a certain period (e.g., 60 days), or else, PF could be settled, and a cheque dispatched to the member's address with the settlement forms filled in advance?

4. Can the above (point no. 3) be included in the relieving letter of the member?

5. As part of an employee's appointment letter, can we insert a clause stating that on cessation of employment, the employee has to sign a letter for withdrawal of PF within a time limit of 90 to 180 days for transferring the PF balance to a new company/exercising the option of withdrawal?

The answer to your queries is as follows:

Interest Credit for Resigned Members

1. Do we need to credit interest to members who have resigned and not transferred/withdrawn their PF balance, and their age as of 11th November 2016 is 58 years or more?

Ans: If the retirement age is 58, interest will be paid for 58 + 3 years.

Employment Abroad and PF Interest

2. For those members who have taken up employment abroad, can they be considered as "permanently migrated abroad"? Should we collect any documentary evidence proving migration abroad? How do we prove that a member has permanently migrated abroad or gone abroad for employment?

Ans: If a member writes in the resignation as "Migrating out of India," in that case, the interest will be paid Date of Resignation (DOR) + 3 years. If the resignation letter only mentions resignation, the interest will be entitled up to retirement + 3 years.

PF Transfer and Settlement Process

3. In the case of resigning employees, can a letter be obtained from such employees stating that they will transfer their PF to their new establishment within a certain period (e.g., 60 days)? Otherwise, can the PF be settled, and a check dispatched to the member's address with the settlement forms filled in advance?

Ans: It is mandatory for the member to transfer the PF to the new establishment when joining a new establishment where the PF Act is applicable. Waiting for 60 days is not necessary. The withdrawal application cannot be processed without a date. The application must include a declaration that states, "For the last two months, I have not been in service where PF is applicable." Making a false declaration is not allowed. In the case of retirement, it is the employer's duty to obtain the withdrawal form on the retirement date.

Including PF Information in Relieving Letter

4. Can the information mentioned in point No. 3 be included in the relieving letter of the member?

Ans: No, the answer is already included in point 3.

Appointment Letter Clause for PF Withdrawal

5. As a part of an employee's appointment letter, can we insert a clause stating that upon cessation of employment, the employee has to sign a letter for the withdrawal of PF within a time limit of 90 to 180 days to transfer the PF balance to the new company or choose the option of withdrawal?

Ans: No, you cannot compel the withdrawal of the amount before the retirement date. If the member joins a new establishment where the PF Act is applicable, they need to provide the Universal Account Number (UAN) and link the UAN. The transfer application will be generated online.

Thanks,

Vidyadhar Bhat

1) I also have a few queries: if an employee leaves the organization at the age of 50 and does not claim the PF accumulation, and the retirement age as per company policy is 60, will they earn interest up to 63 years of age or until they withdraw it?

2) What should be done with already unclaimed accounts as of 31-03-2016? Will they accrue interest? Should we transfer them into PF contributions liability from the Unclaimed Account Ledgers?

Thank you once again. Please assist me with this.

Regards, Sahdev

Answers to the Queries of Mr. Sudeep

1. If an employee resigned and their age as of 11th November 2016 is 58 years or more, no interest will be paid, and the account will be considered inoperative.

2. Apart from the reason of resignation given as "Migrating out of India" in the resignation letter, the employer can use their own sources to determine whether the employee is working in India or abroad. Migration refers to the movement of people to a new country to find work or better living conditions. In this case, interest will be paid from the date of resignation plus 36 months.

3. In this scenario, the employer can devise their own policy. They could obtain a letter or declaration from the resigning employee. If the transfer application, i.e., Form No. 13, is not received within a specified period, say 3 months, based on the letter, considering that the employee is not working elsewhere, the PF could be settled, and a cheque dispatched to the member's address. The letter should clearly state that the employee will transfer their PF to the new establishment within 60 days or inform for an additional grace period, else it will be treated as a withdrawal application.

4. There is no harm in including the above in the member's relieving letter, and it is not barred by any law. Most organizations are adopting this practice. This is being done not only for PF but also for any other statutory dues.

5. Just like some organizations take a bond from employees, this too could be inserted in the appointment letter as a separate clause, which will benefit both the employee and the organization.

Regards

Dear Mr. Sahdev,

The member is entitled to receive interest until the retirement date + 3 years or until the withdrawal of the fund, whichever is earlier. From Nov 16 onwards, no inactive account. Members who have migrated out of India or are above the retirement date + 3 years will receive interest.

Thanks,
Vidyadhar Bhat

Friends,

Please find attached an article on the amendment that has been made, which could be of interest.

Thanks

I am 66 years of age and have been contributing to my EPFO account until November 2016. Since then, I have left that job and am currently working after a one-year gap with a company that is not covered under the EPFO system.

EPFO Notification and Interest Accrual

I have been informed that EPFO issued a notification in November 2016 stating that an EPF account will be considered operative, and the account holder will continue to earn interest if they leave mainstream employment to pursue self-employment for entrepreneurial goals or work for employers not covered under the EPF scheme. Such employees can now retain their EPF fund balance with the EPF authorities and continue earning interest.

Could you please advise on the current policy regarding the accrual of interest for such accounts?