The rising deficit under the EPS and viability of the defined benefit pension scheme posed a major fiscal risk for the government.
Last year, the labour ministry sought an one-time bailout package of R14,000 crore for wiping out the losses of EPS. But the proposal was turned down by the finance ministry, which asked EPFO to wind up EPS and switch to the National Pension System (NPS).
The lower EPS deficit should come as a major relief to the government, which is trying to cut the fiscal deficit to 3% by 2016-17 from 4.7% of last year.
On its side, EPFO is considering raising the minimum mandated basic salary limit to R15,000 per month from the present R6,500 and raising the contribution for EPS by 0.66% to close to 9% to narrow the EPS deficit
Earlier, KA Pandit used the World Bank's PROST model to show EPS will not have a problem in funding its future liabilities until 2075, a view doubted by experts and trade unions.
The firm said EPS will have positive cash flow even if the wage ceiling for EPF coverage is raised to R7,000 per month in 2012 and raised by R500 every five years.