The Government has amended the Employees’ Pension Scheme (EPS) 1995 to allow members with less than six months of service to withdraw benefits. 

Further, the calculation of EPS pension will now depend on completed months of service and wages, enabling members for higher withdrawal benefits. 

“Government of India has amended the Employees’ Pension Scheme (EPS), 1995 to ensure that EPS members with less than 6 months of contributory service also receive withdrawal benefit. This amendment will benefit more than 7 lakh EPS members every year who leave the scheme with less than 6 months of contributory service,” the Ministry of Labour and Employment said in an official release dated June 28, 2024.

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Till now, members leaving EPS before contributing for 6 months were not getting any withdrawal benefit. This is so because the withdrawal benefit was being calculated on the basis of the period of contributory service in completed years and the wages on which EPS contribution has been paid. 

As a result of the old rule, lakhs of claims for withdrawal benefits were being rejected every year. However, the new rule will ensure such claims are not rejected. 

“Till now, the withdrawal benefit was being calculated on the basis of the period of contributory service in completed years and the wages on which EPS contribution has been paid. Therefore, only after completing 6 months and above of contributory service, the members were entitled for such withdrawal benefit. Consequently, the members leaving scheme, before contributing for 6 months or more, used to get no withdrawal benefit. This was a cause of many claim rejections and grievances as many members were exiting without having less than 6 months of contributory service,” the ministry said. 

“During the financial year 2023-24, approximately 7 lakh claims for withdrawal benefits were rejected due to contributory service being less than 6 months. Henceforth, all such EPS members who have not attained the age of 58 years as on 14.06.2024 will become entitled for withdrawal benefit,” it added.

Also Read: National Pension System (NPS) Allows Same Day Investment Now. Here’s What You Should Know

New EPS Calculation Rule

The government has also modified ‘Table D’ to ensure fair distribution of withdrawal benefits, which may benefit over 23 lakh EPS members every year.

Under the updated ‘Table D,’ the lump sum withdrawal benefit now depends on the months of service completed, rather than the earlier method based on completed years of service.

The “Table D” shows the return on contribution based on months in service. For example, at 80 months, the return on contribution is 6.78.

“The amount of withdrawal benefit will henceforth depend upon the number of completed months of service rendered by the member and the wages on which EPS contribution was received. The above measure has rationalized the payment of withdrawal benefit to members,” the release said. 

Earlier, the calculation under Table D ignored the fractional period of service rendered for less than 6 months after each completed year. This resulted in a lesser amount of withdrawal benefit in many cases, the ministry said.

“With the modification of Table D, the Contributory service for calculating the withdrawal benefit will be now considered in completed months. This will ensure fair payment of withdrawal benefit,” the ministry said. 

Also Read: NPS Balance Life Cycle Fund Launch Soon; It Will Allow 50% Equity Investment Till Age 45 

Let us understand with the help of an example: 

Suppose an EPS member decides to withdraw benefits after working for 2 years and 5 months. Let’s say his monthly wage during this period is Rs 15,000. 

Under the previous rule, the calculation of withdrawal benefits would have only considered complete years of service, not the months. So, he might have received Rs 29,850 for 2 years of completed service.

However, every completed month of service is accounted for now. So, for 2 years and 5 months (which is 29 months in total), the calculation would be based on this exact period. Considering the same monthly wage of Rs 15,000, the revised calculation permits him to receive Rs 36,000 as a withdrawal benefit.

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