Employees’ Provident Fund Organization (EPFO)

Context:

• The return on workers’ retirement savings parked with the Employees’ Provident Fund Organization (EPFO) has been slashed to 8.1% for 2021-22 from the 8.5% rate credited to members’ accounts in the past two years.

About:

• The Employees’ Provident Fund Organization (EPFO) is the statutory body under the Government of India’s Ministry of Labor and Employment, which is responsible for regulation and management of provident funds in India.
• The EPFO administers the mandatory provident fund. It also manages social security agreements with other countries.
• International workers are covered under EPFO plans in countries where bilateral agreements have been signed. As of May 2021, 19 such agreements are in place.
• The EPFO’s top decision-making body is the Central Board of Trustees (CBT), a statutory body established by the Employees’ Provident Fund and Miscellaneous Provisions (EPF&MP) Act, 1952. As of 2018, more than ₹11 lakh crore (US$157.8 billion) are under EPFO management

Issue:

• The cut in the EPF rate, at a time when inflation is resurging, attracted criticism from the central trade union representatives on the Board who called for the 8.5% return to be retained.
• Employee representatives had also opposed the last rate cut on EPF savings from 8.65% in 2018-19 to 8.5% in 2019-20.
• The last time the EPF savings were paid an annual return this low was in 1977-78, when the rate was 8%, but that marked the highest EPF rate at the time since the EPFO’s inception in 1952. Since then, the EPF rate has only been lower than 8.5% in three years — 1979-80, 1980-81 and 2011-12 — when an 8.25% return was paid on balances.

Source: THE HINDU