Reversing a five-year-old decision, the Employees’ Provident Fund Organisation’s top decision-making body, the Central Board of Trustees, has decided to pay interest on all inoperative EPF accounts from April 1 onwards. Inoperative EPF accounts are those that have not received any contribution from employees or employers for 36 months. The move will benefit 90 million account holders with deposits of over Rs. 27,000 crore, but it will not apply retrospectively.
Millions of organised sector employees will start receiving interest payments on their inoperative Employees’ Provident Fund (EPF) savings from April 1 this year. Inoperative EPF accounts are those where there have been no contributions by an employee or their employer for 36 months.
Reversing its five-year-old decision which barred inoperative EPF accounts from earning interest, the Central Board of Trustees (CBT), the highest decision making body of the EPF organisation, on 29.3.2016 decided to pay interest on all such accounts. The new rule, however, will not apply retrospectively, EPFO officials said.
The decision to stop the payment of interest to such accounts was taken in 2011 in order to dissuade workers from making their accounts inactive and encourage them from merging them with an active one. A move to review earlier decision comes in the backdrop of new EPF rules introduced in February, 2016 that bar employees from withdrawing their entire PF amount till they turn 58.
“Under the new rules, when one can’t withdraw the entire amount even after being jobless for two months why should not the government pay interest on the accumulated money,” DL Sachdeva, the national secretary of All India Trade Union Congress and a member of the CBT, told HT.
On April 1, 2011 an amendment to EPF rules barred interest payments to accounts inoperative for more than 36 months.
“UPA government stopped interest on inoperative accounts. Now we have taken a pro-worker decision. The UPA government, which was claiming to be a pro-worker, stopped the interest on inoperative accounts. Now we have decided to credit interest in inoperative accounts,” labour minister Bandaru Dattatreya said after the CBT meeting.
Para 72(6) Employee Provident Fund Scheme 1952 defines an Inoperative account as follows:
Any amount becoming due to a member as a result of (i) supplementary contribution from the employer in respect of leave wages/arrears of pay, instalment of arrear contribution received in respect of a member whose claim has been settled on account but which could not be remitted for want of latest address, or (ii) accumulation in respect of any member who has either ceased to be employed or died [but no application for withdrawal under paragraphs 69 or 70 or transfer, as the case may be has been preferred] within a period of [thirty six months] from the date it becomes payable, or if any amount remitted to a person, is received back undelivered, and is not claimed again within a period of [thirty six months] from the date it becomes payable, shall be transferred to an account to be called the “Inoperative Account”.