Running a big deficit on its pension scheme, the Employees Provident Fund Organisation has charted out a plan to track subscribers drawing pension from more than one account in violation of rules.
The move assumes importance in the light of the government notifying that it will ensure a minimum monthly pension of R1,000 for EPFO subscribers, which will cost the exchequer an additional R1,217 crore in 2014-15.
EPFO commissioner KK Jalan told FE that some subscribers were operating multiple EPF accounts for more than 10 years and drawing pension from more than one account. "It is not permitted under the employees pension scheme (EPS)," he said.
Jalan could not give an estimate on how many people were drawing multiple pensions as the EPFO, he said, was still collating information.
While the practice of drawing pension from multiple accounts may be deliberate in some cases, it could also be due to delays in transferring EPF funds when a person switches jobs.
If, for instance, a subscriber has two EPF accounts where contributions were made for at least 10 years each and, hence, he is eligible to draw a monthly pension of, say, R600 and R700, respectively, the total outgo from EPS will be R1,300. Since the government has now notified a minimum monthly pension of R1,000, the outgo from EPS will total R2,000 on those two accounts, resulting in an extra outgo of R700 per month. While it could be a windfall gain for those operating more than one account, it will unduly pressures the financial position of EPS.
The EPS scheme was started by EPFO in 1995 with a broad objective of providing social security at old age. Although EPS had a surplus of R1,689 crore in its first year of launch (1995-96), profitability started eroding as interest rates started to fall. The scheme had a deficit of R43 crore in 2000-01, which widened to R61,608 crore by 2008-09. However, a preliminary report prepared after updating subscriber data pegged the deficit at R10,855 crore at the end of March 2012. About 44 lakh people, including widows and children of deceased pensioners, draw pension from EPS.
The EPFO has recently embarked on a drive to identify people misutilising the EPS scheme. The drive was expedited after the Allahabad High Court, in relation to a case, asked EPFO to give details of the number of people misutilising the scheme.
Accordingly, the EPFO head office has directed all regional