Supreme Court upholds notification amending employees pension scheme as ‘legal and valid'

The dispute primarily concerned the controversial amendments made to paragraph 11 of the Employees Pension Scheme (EPS) of 1995.

The Supreme Court on Friday, November 4, 2022, upheld the Employees' Pension (Amendment) Scheme, 2014 as "legal and valid".

The judgment by a three-judge Bench led by Chief Justice of India U.U. Lalit came in an appeal filed by the Employees Provident Fund Organisation challenging decisions of the Kerala, Rajasthan and Delhi High Courts quashing the 2014 amendments on "determination of pensionable salary" under the Employees Pension Scheme (EPS) of 1995.

The dispute primarily concerned the controversial amendments made to paragraph 11 of the EPS-1995.

Before the amendments were introduced, every employee, who became a member of the Employees Provident Fund Scheme of 1952 as on November 16, 1995, could avail the EPS. In the pre-amended version of EPS-1995, the maximum pensionable salary cap was ₹6,500. However, members whose salaries exceeded this cap could opt, along with their employers, to contribute up to 8.33% of their actual salaries.

The 2014 amendments to the EPS, which included changes in paragraph 11(3) and by inserting a new paragraph 11(4), had raised the cap from ₹6,500 to ₹ 15,000. Paragraph 11(4) said only employees, who were existing EPS members as on September 1, 2014, could continue to contribute to the pension fund in accordance with their actual salaries. They were given a window of six months to opt for the new pension regime.

Besides, 11(4) created an additional obligation for members whose salaries exceeded the ₹15,000 ceiling. They had to contribute at the rate of 1.16% of the salary.

Again, the pensionable salary was an average of 12 months' pay before the date of the employee's exit from the EPS. The amendments had extended the period of calculation of average pensionable salary from 12 months to 60 months.