Employees’ Provident Fund Organisation (EPFO) is a statutory body that manages the Employees’ Provident Fund, which is a social security account jointly sponsored and operated by employers and employees in India. Employees Contributory Scheme (ECS), which was introduced in 1981, provides insurance coverage to employees for accidental death, permanent total disablement, maternity leave with full pay, and other benefits.
EPFO has been designated as the National Pension System Operator by the Government of India. EPFO operates India’s largest pension fund with assets of more than Rs 2.5 lakh crore as on April 1, 2017. EPFO has processing and investment arms that have a combined employee strength of over 1 crore.
What is the Employees’ Provident Fund Organisation?
Employees’ Provident Fund Organisation (EPFO) is a provident fund scheme in India which was established on 1 January 1935. The objective of EPFO is to provide timely and efficient retirement benefits to its members. As of March 2016, there were over 186 million active members in the scheme.
The main features of the EPFO are as follows:
– Employees contribute 6 percent of their salary to the scheme
– Employers contribute an additional 1 percent of employee salaries
– The employer also makes an annual contribution towards the employees’ gratuity and pension liabilities
– The corpus of EPFO funds is invested in government bonds, treasury bills, and other safe securities
The maximum retirement benefits that an employee can receive under the EPFO Scheme are Rs 19,000 per month as a regular pension and Rs 37,000 per month as an early retirement benefit. These benefits are payable only after the employee has completed 15 years of continuous service with the same employer.
How the EPFO Works
The Employees’ Provident Fund Organisation (EPFO) is a statutory body established under the Employees’ Provident Fund and Miscellaneous Provisions of the Labour Act, of 1948. The EPFO administers the provident fund scheme for over 1 crore employees in India.
The EPFO operates through three divisions- employee insurance, pension, and savings. Employee Insurance covers death, disablement, and permanent total absence due to illness or accident. Pension covers retirement benefits, spouse’s pension, and children’s educational benefits. Savings helps employees save for their future.
The EPFO has been consistently ranked as one of the best-performing public sector organizations in India. In fiscal 2016-17, it earned a profit of Rs 9,711 crore on total assets of Rs 3 lakh crore. This was despite a decline in inflows from subscribers during the year owing to subdued asset prices and slow economic growth.
EPFO Account Types
There are three types of EPFO accounts: provident fund, Employees’ Pension Scheme (EPS), and Employees’ State Insurance Scheme (ESIS).
A provident fund account belongs to an employee who has contributed a minimum of 8% of his or her salary every month. The money in the account is used to provide retirement benefits, medical reimbursement, and other statutory benefits.
An EPS account belongs to an employee who has contributed at least 12% of his or her salary every month. The money in the account is used to provide retirement benefits, medical reimbursement, maternity leave benefits, and other statutory benefits.
An ESIS account belongs to an employee who has contributed at least 16% of his or her salary every month. The money in the account is used to provide retirement benefits, medical reimbursement, maternity leave benefits, unemployment compensation benefit, and other statutory benefits.
EPFO Investments
Employees’ Provident Fund Organisation (EPFO) is national social security and provident fund organization in India. Established on 1st April 1935, it is the largest employee provident fund organization in the world with more than 58 crore members organized into 21,000 units.
The main purpose of the EPFO is to provide retirement benefits and pensions to employees and their families. The organization also invests its funds in various securities and other investments to achieve long-term capital gains and socio-economic returns for its members.
In recent years, EPFO has been investing in high-yield debt instruments, select real estate assets, and equity shares of private companies. This diversification of its investment portfolio has helped the organization achieve better returns while preserving its capital base.
EPFO Member Benefits
Employees’ Provident Fund Organisation (EPFO) is a statutory body established under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. The organization is responsible for the administration of the Employees’ provident fund scheme, which was started in 1875 by British colonial authorities in India. EPFO has over 1.3 crore, active members, across the country and has generated over Rs 2.5 lakh crore for its members since its inception.
The main benefits that employees enjoy through their membership of EPFO include:
– Exemption from income tax on provident fund contributions up to Rs 1.5 lakh annually;
– 100 percent withdrawal facility from PF balance after 55 years of continuous service;
– 10 percent interest on accumulated PF balances;
– Medical insurance coverage for employees and their family members up to Rs 3 lakh per annum with a premium subsidy of 50 percent;
– Life cover of Rs 30,000 with a premium subsidy of 50 percent available as an addition to the employee’s medical insurance plan;
– Education loan assistance up to Rs 25,000 per academic year for eligible students pursuing graduate or postgraduate courses;
– concessional rates for homes purchased under Pradhan Mantri Awas Yojana (PMAY); and…
The EPFO Dividend
Employees’ Provident Fund Organisation (EPFO) is an autonomous body that was set up in 1957 to provide a statutory retirement benefit to employees. The EPFO has over 57 crore active members and over Rs 7.5 lakh crore assets under management as on 31 March 2017.
The EPFO Board of Trustees administers the corpus through four investment vehicles – equities, debt, real estate, and hybrid products – to generate high-quality long-term returns for its members while ensuring prudent management of its assets.
Annual dividends are declared by the EPFO on or about 15 November each year and paid out to all eligible members as per their membership status as of that date. The dividend payout ratio stood at 84% in 2016-17 and has been consistently above 70% since 2009-10 despite global economic uncertainties during that period.
The main reasons for this consistent dividend payout record are:
1) A conservative investment philosophy that focuses on generating high-quality long-term returns for EPFO’s members;
2) strong governance parameters followed by the EPFO Board of Trustees;
3) robust risk management framework in place overseen by an independent Financial Risk Committee (FRC); and
4) an optimization process is undertaken by the Funds Management Department to manage fund inflows/outflows judiciously.
Conclusion
Employees’ Provident Fund Organisation (EPFO) is the body that manages retirement funds for millions of salaried employees in India. It was established in 1942 and provides a statutory basis for the management, custody, and distribution of provident funds by employers to their employees.
Contributions are compulsory from employers with an annual payroll exceeding Rs 1 crore, while employee contributions range between 8% and 12%. EPFO also invests these assets on behalf of its subscribers.
