‘No deficit in the pension fund,’ pensioners tell Supreme Court to counter EPFO

On the third day of hearing in the EPF Pension case, the lawyer representing pensioners in Kerala on Thursday August 4 questioned the veracity of the actuarial reports and other documents provided by the Employees Provident Fund Organization (EPFO) which pointed out that implementing the Kerala High Court judgment of 2018 would result in a net actuarial deficit of Rs 15,28,519 crore in the pension fund.

In 2018, the High Court, while striking down the Employees Pension Scheme (Amendment), 2014 [2014 Amendment Scheme]made it possible to pay a pension proportional to salary above the threshold limit of Rs 15,000 per month.

A bench of 3 judges comprising Judges UU Lalit, Aniruddha Bose and Sudhanshu Dhulia was hearing appeals filed by the Employees Provident Fund Organization challenging judgments of the High Courts of Kerala, Rajasthan and Delhi which struck down the 2014 Amendment Scheme.

In front of the bench Senior Counsel Dr. Kailas Natha Pillai, appearing for a set of Milma (Kerala Milk Co-operative Marketing Federation) employees argued that the two actuarial reports are misleading as only the pension benefit liability was projected.

As the hearing progressed, Pillai presented the court with the terms of the EPS program.

“My argument is, plain and simple, before the amendment we were safe, and our remittances were also safe. After the amendment, clauses were added”

“What’s happening is before the amendment, whether you have to exercise an option or not? That aspect is slightly gray. But now after the amendment, they’ve made it mandatory,” Bench said.

“It’s a new condition, which is not acceptable to us. It’s against the spirit of the pension plan as well as the law on the provident fund,” Pillai said.

“When did you raise your challenge regarding the options business?” the court further asked.

“The same year, before the high court,” replied the lawyer.

Yesterday the Supreme Court put questions to the Union Government and sought evidence to show the financial burden that will be created on the implementation of High Court judgments allowing a pension commensurate with salary above the threshold.
Here are the other key aspects that were discussed during the hearing:

The pension is paid out of interest accrued on the fund

Pillai pointed out that the corpus of the common pension fund under the pension scheme, which stood at Rs.3,18,412.38 Crores on March 31, 2017, increased to Rs.4,37,762.54 Crores in two years. The accumulated corpus has always steadily increased from Rs.1,83,405.36 Crores in 2012-2013 to Rs.4,37,762.54 Crores in 2018-2019, an increase of about 130% in 7 years.

Further, the interest earned on the invested Fund was Rs 14,354.68 crore in the year 2012-2013, which increased by more than 130% in 2019, reaching Rs 3,32,982.68 crore. Pillai pointed out that according to the annual report produced by EPFO ​​and UOI itself, the total amount disbursed for the pension as of 31.3.2019 is only Rs. won.

“This does not affect the amount of the investment/main corpus….. The fund has not experienced any cash flow problems so far despite the actuarial deficit projected in the valuation of the fund….”, said Pillai , while aiming to challenge the credibility of the data produced by the EPFO ​​and the Syndicate and pointing out that they are false.

Further, he also attacked the appellants’ argument that the EPS fund is a “pooled fund” and the alleged “cross-subsidization” of pensions to the detriment of mandatory members.

Pillai said that according to the data provided by the EPFO, the pension scheme works on the principles of insurance, that is, the pooling and sharing of risks and the covering of various risks, which the EPFO ​​wrongly calls it “cross-subsidy”. There is no item or nomenclature called cross-subsidization in EPS, 1995, he said.

Both funds are similar investments

After Pillai finished his arguments, Senior Attorney Jayant Muthurajappearing for employees of Malapuram District Co-operative Bank commented.

It was argued that the Provident Fund and the Pension Fund are investments of the same nature. The only difference between the two would be the adjustment of the books, lead attorney Muthuraj said. This assertion came in response to the appellants’ assertion that EPFS and EPS differ in their structure and operation.

Tuesday, Senior Advocate Aryama Sundaram appearing for the EPFO ​​had told the Supreme Court that the structure of the Employees Provident Fund Scheme (EPFS) and the Employees Pension Scheme (EPS) were entirely different.

Secondly, in accordance with the 2014 amendment, emoluments, for pension purposes, will be calculated on the basis of the salary received during the last 60 months, instead of 12 months, as was originally the case . This affects acquired rights with respect to the employee. Thus, Muthuraj’s argument was that it could not have been done because employee rights cannot be taken away retrospectively. Maybe they could have done it prospectively, he said.

Also, an amendment, which actually requires the employee to contribute to the pension, is contrary to the spirit of the Parents Act, he added.

The lead lawyer argued that when the pension fund was established in 1995, EPFO ​​encouraged everyone to join and when employees began to retire a few decades later, the changes were made to deny benefits to retirees.

Moreover, the actuarial reports on which the EPFO ​​and the union rely have not been substantiated by any element, he told the judiciary.

As the hearing drew to a close, the Court clarified that attorneys appearing for the exempt trusts would be heard. But, since the 2018 Kerala High Court Judgment does not include this aspect, they would be heard when the Delhi and Rajasthan High Court cases come up. Nevertheless, they are free to make submissions in support of the judgment of the Kerala High Court, the court said.

EPF retirement file: a chronology

In 2019, a three-judge bench comprising then CJI Ranjan Gogoi, Justice Deepak Gupta and Justice Sanjiv Khanna dismissed the special leave petition filed against a Kerala High Court judgment striking down the Employees Pension Scheme (Amendment ), 2014 which capped the pensionable salary. at Rs.15,000 per month.

The Kerala High Court, while overturning the 2014 amendments by its 2018 judgment, had declared that all employees will be entitled to exercise the option provided for in paragraph 26 of the EPF scheme without being restricted to it by the insistence on a date.

In addition, the High Court had also quashed orders issued by EPFO ​​refusing to grant employees the option of exercising a joint option to pay contributions to the employees’ pension scheme on the basis of the actual wages received by them.

In April 2019, the Supreme Court dismissed EPFO’s request for special leave against the judgment of the Kerala High Court, by an interim order.

Later, in January 2021, a panel of three judges recalled the dismissal order in the motions for review filed by EPFO ​​and posted the cases for hearing in open court.

On February 25, 2021, the divisional bench of Justice UU Lalit and Justice KM Joseph prevented the High Court of Kerala, Delhi and Rajasthan from taking contempt proceedings against the central government and EPFO ​​for non- enforcement of HC verdicts.

In August 2021, a bench of 2 judges of the Supreme Court had appealed to a bench of 3 judges to consider the following questions:

Dolores W. Simon