The government has changed the Employees’ Pension Scheme (EPS) of 1995 to enable members with fewer than six months of employment to receive a withdrawal benefit.
This new rule will benefit over 7 lakh EPS members annually, stated a Press Information Bureau release issued on June 28, 2024. Additionally, the government amended Table D to ensure that withdrawal benefits are paid fairly; this change would benefit over 23 lakh members.
Change in EPS rule for calculating lump sum withdrawal amount on early exit: Who benefits, who loses?
What is EPS withdrawal benefit
Many EPS 95 participants withdraw from the scheme before completing the necessary 10 years of service to qualify for a pension. These members get a withdrawal bonus under the Scheme’s rules.
Till now, the withdrawal benefit was being calculated based on the period of contributory service in completed years and the wages on which EPS contribution has been paid.
As a result, only members who had completed 6 months or more of contributed service were eligible for this withdrawal reward. As a result, participants who left the program before contributing for six months or longer received no withdrawal benefit. This resulted in numerous claim denials and disputes since many members left without having completed at least six months of contributing duty. All such EPS members who have not yet reached the age of 58 on June 14, 2024 will be eligible for withdrawal benefits.
Changes in table D
The Central Government has modified the Table D to calculate the lumpsum payment an employee is eligible to receive if he/she quits the pension scheme before completion of 10 years. As per the notified ‘Table D’ the lumpsum withdrawal benefit is now calculated on the basis of the months of service completed by an individual. As per the earlier, ‘Table D’ the withdrawal benefit was calculated on the basis of number of years of service completed. The ‘Table D’ provides return on contribution corresponding to the number of months in service. For example, for 80 months, the return on contribution provided is 6.78.
According to the Employees’ Pension Scheme guidelines, an EPS member is eligible to earn a pension if he or she has completed ten years of qualifying service. In layman’s terms, a member must contribute to his or her EPS and EPF accounts for ten years before receiving a pension. If an employee exits the EPS system before the 10-year period is over, a lump sum payment is made in lieu of the pension.