The monopoly of Employee Provident Fund Organisation has been lost as most of its subscribers has joined the National Pension System (NPS) which offer higher returns (20%) when compared to EPFO (8.75%). NPS is a scheme introduced in 2004 for the new government employees by which the employee gets a lump sum amount as pension at the time of retirement based on their performance. EPFO is the statutory body of government to maintain EPS which is the investment for salaried individuals. To maintain its subscribers, the EPFO has proposed an increased benefit from Employees Deposit Linked Insurance (EDLI) scheme. EDLI scheme is to provide for the benefits of employee’s life insurance. Through this the employee can cover an amount ranging from 5000 to 200000 based on the salary.
To overcome this situation EPFO has proposed an increase in benefits from EDLI and decided to keep money in PF account and give incentives to its subscribers. K KJalan, The Central Provident Commissioner of this fund has proposed to enhance the insurance benefits under EDLI to 30 times the monthly wage as against 24 times now.
Currently EDLI subscribes with a monthly wage of Rs 15,000 and with a service of more than one year get the total benefits Rs 3.6 lakh under this scheme. This will rise to Rs 5.5 lakh, if the proposal goes through but this proposal is pending with the labour ministry now. EDLI provides lump sum payment to the nominated beneficiary if the subscriber death is due to natural cases or accidents.
Out of the total contribution of 697.7 crore, the claims worth 152.6 crore were settled. After seeking exemption from EDLI, 80 lakh subscribers opted for private group insurance plans. A premium for the life should be given to the employees when the organisation does not have a group insurance scheme and this is entirely funded by the employer and contributes 0.5% of the monthly basic pay.
The government has decided to give formal sector workers a choice between EPFO and NPS. EPFO has a challenge to improve benefits of PF and similar schemes. While presenting budget Finance Minister ArunJaitley said that for employees below certain threshold of monthly income the employee may opt for EPS or NPS. Both EPF and ESI have hostages rather than clients. Low paid workers suffer more deductions than better paid workers. The government has introduced additional income tax deduction of Rs 5000 for subscribers to make NPS more attractive.