Understanding the New EDLI Scheme: How Does the Increased Minimum Assurance Affect You?

Increase in Minimum Life Insurance under EPF

The Indian government has increased the minimum life insurance for employees covered under the Employees' Provident Fund (EPF) to 2.5 lakh, effective from February 15, 2018 (Article on Economic Times).

The Employees' Provident Fund Organisation (EPFO) has raised the minimum assurance limit under its Employees' Deposit Linked Insurance Scheme (EDLI) as per a gazette notification dated February 15. This change makes it more beneficial for contributing members of the EPF to stay as a part of the EPFO. The assurance benefit for an eligible employee will now be a minimum of Rs 2.5 lakh and capped at Rs 6 lakh. This provision will remain in effect for two years from the date of publication of this Scheme in the Official Gazette, i.e., February 15.

Earlier, the minimum benefit amount was set at Rs 1.5 lakh. In September 2015, the EPFO's apex decision-making body, the Central Board of Trustees (CBT), had decided to raise the EDLI scheme benefits from Rs 3.6 lakh to Rs 6 lakh, which got notified in June 2016.

Understanding the EDLI Scheme

Could you please explain in more detail how the EDLI scheme works and how the benefits are calculated?

The Employees' Deposit Linked Insurance (EDLI) scheme is an insurance policy to provide a lump sum payment to the nominated person if an employee dies during his/her working life. The payment is linked to the average balance in the provident fund account of an employee.

In terms of contributions, the employee doesn't need to contribute separately. The employer contributes 0.5% of the employee's wages towards EDLI. This contribution is capped at Rs 75, based on a maximum wage ceiling of Rs 15,000, even if the provident fund is paid on higher wages. The employer also pays an administration charge of 0.1% of wages or a minimum of Rs 200 towards EDLI. The employer cannot deduct this contribution from the employee's wages or recover it in any other way.

The benefit calculation under the EDLI scheme is based on the average monthly wages drawn (subject to a maximum of Rs 15,000), during the twelve months preceding the month in which the employee dies. This amount is multiplied by 30 times, plus 50% of the average balance in the account of the deceased in the provident fund during the preceding 12 months or during the period of his membership, whichever is less. The minimum payable will now be Rs 2.5 lakh while the maximum will be Rs 6 lakh.

This amendment to increase the minimum assurance to Rs 2.5 lakh is a significant move that enhances the financial security of the employee's family in the event of the employee's untimely death.