Navigating EPS Contributions: Should I Opt Out with My New Employer?

My first employer was not making any contribution to EPS, but my second employer started. Now I have changed the organization, and my third employer is not contributing to EPFO. Do I need to opt out of EPS or continue as my second employer started EPS even though, in all cases, my basic salary is more than 15,000?

Opting Out of EPS

Opting out of EPS will depend not only on the salary but also on the date of joining the Fund. If your first employment was after 1st September 2014 and the PF qualifying salary at the time of joining the first organization was above Rs 15,000, then your opting out of EPS was correct. Actually, it is not opting out, but you should have been excluded from EPS. Now, the second company has contributed to EPS either by mistake or due to a lack of knowledge of the law. They should not have contributed to EPS but should have contributed their share exclusively to EPF without bifurcating it as 8.33% to EPS and the remaining 3.67% to EPF.

Informing the Third Company

When you join a third company, you should inform the Personnel Officer that you are an existing member of EPF and there is no way you could be excluded from PF. Naturally, if the third company has fewer than 20 employees, that establishment will not have PF registration. In such cases, you will have to wait until the establishment gets coverage first and then you can be covered by EPF.

Correcting Contributions

Before that, you need to get the contributions made by the second company corrected. Otherwise, when you go for the withdrawal of PF or transfer the PF, the system will reject it, stating that your first company did not contribute to EPS or the second company did contribute to EPS, etc. Nowadays, the main objective of EPFO is the rejection of claims. Therefore, you have to correct the second company's contributions and divert the funds from EPS to EPF. It is just a reconciliation and transfer of funds for the EPFO, but they will not do it by themselves until the member reminds them of their duties every day!

Thanks, Madhu and T.K, for such a clear answer. One doubt, my third organization has more than 20 employees, and they do contribute to EPS for other employees, but I am not sure why, in my case, they contributed the whole amount to the employer PF.

Also, please correct me. Is my third employer right? Should they not be contributing to EPS? Instead, should I ask my second employer to correct this mistake?

FYI, my joining date at the first company was in 2018.

Once you're enrolled in EPS, you generally stay enrolled until you're no longer eligible (reach retirement age or leave the workforce permanently). There's usually no need to opt out.

Employer contribution determines account: However, your employer's contribution decides which account receives the 8.33% contribution meant for pension.

Salary below Rs. 15,000: If your basic salary is less than Rs. 15,000 per month, the entire 8.33% goes to EPS.

Use the Unified Account Number (UAN) portal to verify your EPS account status and contributions. This will give you a clearer picture.

EPF and EPS Contribution Clarification

Your third organization should have contributed the entire contribution payable by the employer to EPF because your date of joining the fund is after September 2014. If you had declared that you were not covered by EPS in Form 11, then they (the third company) would not have covered you under EPS also. Now, the situation is as follows, I guess:

1. Your date of joining the EPF for the first time was in 2018.
2. Your basic salary, on which PF was deducted, was above Rs 15,000 when you joined the first company. Therefore, they put the entire contribution payable in EPF without bifurcating it as 8.33% to EPS and 3.67% to EPF, which was the expected procedure.
3. Your second company also contributed to EPS. Now you are a member of EPS, but you are not actually entitled to be covered by EPS.
4. Your third company started PF, and they contributed the entire 12% to EPF. This is correct because you are not entitled to become a pension fund member by law. Therefore, you need to correct the contribution made by the second company by diverting it to EPF. To do that, contact the second company and make the necessary arrangements. Nothing else could work out.

Employees earning a base salary plus DA of Rs. 15,000 or less are required to enroll in the scheme. You will be able to withdraw the EPS once you attain the age of 50 years. However, the amount that you receive will be at a reduced rate of interest.

Can EPS be withdrawn fully?

Ans: One cannot withdraw the full pension amount while still working. An employee can make withdrawals only when they have been unemployed for a minimum of 2 months (also, the employment tenure should be less than 10 years and more than 6 months).

It's to be examined in the light of the recent SC's judgment on capping the salary if there is any impact on this case (relevant FAQs are attached). I'm not sure if it helps.

For clarity of understanding EPF/EPS, those in need may browse these links:
- https://www.policybazaar.com/life-in...on-scheme-eps/
- https://www.epfindia.gov.in/site_en/FAQ.php