Here's how an employee can keep track of his EPS amount

An individual switches jobs and usually transfers the Employees' Provident Fund (EPF) balance to the new employer. But what happens to the funds in the Employees' Pension Scheme (EPS) continues to remain a mystery for many. While the PF account number of the new employer shows the transferred EPF balance, what about the EPS money from the previous employer?

Here are a few pointers on how the EPS works and how one can avail it: 

*An employee contributes 12 per cent of his basic salary directly towards EPF. 

*He does not contribute directly towards EPS. 

*Of the employer's share of 12 per cent, 8.33 per cent is diverted towards the EPS, with a cap of Rs 1,250 (earlier Rs 541) a month. 

*When the employee switches jobs, the EPF gets transferred to the new employer, but not the EPS. 

When the employee switches jobs, the EPS contributions stay with the EPFO. 

*The employee has the option to either withdraw the EPS amount or carry it forward to the next job. This, however, depends on the length of his service and his age. 

Less than 10 years in job 

If an employee has not completed 10 years in service, he can either withdraw the EPS amount, or take the 'scheme certificate'. If he is still working, but hasn't completed 10 years, this, however, is not possible. He can apply only after he has quit his job, i.e., before joining another company. 

The option to withdraw or take the scheme certificate has to be submitted by filling Form 10C, which can downloaded here . Recently, the EPFO introduced 'UAN based Form 10C', 

This form can only be used by an individual who has furnished employee details to the existing employer in 'Form 11-New' ( download here ), furnishing the Aadhaar, bank details, and after getting the Universal Account Number (UAN) activated by providing a cancelled cheque with name, account number and IFS Code. Currently, UAN based Form 10C can only be used for withdrawal and not for taking the scheme certificate 

If you have worked for less than six months, the EPS contributions cannot be withdrawn as the EPFO rules say that for those who have not yet completed 180 days in the organisation, the withdrawal benefit is not admissible. One can, however, apply for the scheme certificate. 

The employee won't get the entire contribution (Rs 541/Rs 1,250 a month) back after applying through Form 10C. The amount received will be subject to Table D as below. 

How it works: If the salary at the time of EPS withdrawal after 8 years , by filing form 10C, is Rs 15,000, then the EPS money one receives is Rs 1,23,300 (Rs 15,000 * 8.22). 

Remember, the employee who hasn't completed 10 years and does not wish to withdraw his EPS money, may opt for the scheme certificate as well. 

Scheme certificate 

Form 10C asks you to choose between the scheme certificate or withdrawal benefit along with filing the date of joining and leaving the company. The EPS money can be withdrawn by an employee or it can be carried forward through a scheme certificate while switching jobs. 

If you have taken a scheme certificate, submit it to the EPFO through the new employer. When you leave the job, you will again have to fill Form 10C. The EPFO will add the new number of years in the scheme certificate, showing the cumulative service record and give it back to you through your employer. 

This continues till one reaches the age of 58 and then surrenders the certificate to the EPFO to start getting pension. One may opt for early pension (reduced to that extent) after 50 years provided one has completed 10 years of service. 

More than 10 years of job 

For an employee, the service for six months or more is treated as one year. Therefore, 9 years and six months will be considered 10 years. Once 10 years are completed, the withdrawal benefit stops and one can only take the scheme certificate from the EPFO by filling the same Form 10C 

Time for pension payments 

Pension begins at the age of 58 and for that, one need to fill Form 10-D ( download here ). Let's see how much pension one could get after the hard times of a working life. The pension amount is based on a formula: 

While working, the maximum amount that can go into the EPS of an employee is 8.33 per cent of the employer's share, but the basic pay is capped at Rs 15, 000. So the amount comes to Rs 1,250 each month, i.e., Rs 15, 000* 8.33 per cent. As the EPS funding is capped, the pension that one will get is also capped and is based on the following formula: 

(Pensionable Salary * service period) / 70. 

The pensionable salary is capped at Rs 15,000 and service period at 35 years. Therefore, irrespective of the actual years and the basic salary, the maximum monthly pension would be Rs 7,500. 

To be eligible for pension (for lifetime and then family pension), one has to work minimum 10 years and then keep accumulating service period through scheme certificates. 

How EPS works 

Remember, an employee does not directly contribute towards his own EPS. It's the portion of the employer's contribution that moves into the EPS. An employee contributes 12 per cent of his basic pay towards the EPF account. 

The employer is supposed to match the employee's minimum contribution of 12 per cent. Of this, 8.33 per cent is diverted towards the EPS and the balance of 3.67 per cent moves into the EPF account. In effect, 15.67 per cent of the employee's salary goes into EPF account each month 

Conclusion 

Peanuts for pension, they say and rightly so. With the maximum pension capped at Rs 7,500 a month and not even indexed to inflation, the dependency on it is certainly not possible. From September 1, 2014, the EPS is only for those new members earning less than Rs 15,000. Therefore, new employees whose basic pay is more than Rs 15,000 will not see any diversion of 8.33 per cent (of the employer's share) towards the EPS. For older employees, the diversion will, however, continue.