More than 2,000 establishments that manage their employees provident fund accounts may soon have to handover the entire corpus to the Employees' Provident Fund Organisation, or EPFO.
The top policy-making body of EPFO, the Central Board of Trustees, has endorsed a proposal, which seeks to take away the trusts' right to manage the funds. The move is aimed at securing the retirement savings of nearly five million subscribers who have contributed an estimated Rs 1 lakh crore to the corpus of these trusts.
Hundreds of organisations turn sick every year and fail to pay the provident fund dues to their workers, Labour Secretary PC Chaturvedi said. "The new provision would ensure that workers' money is safe in such cases," he said. The EPFO has submitted its proposal to the labour ministry, which is now preparing a Cabinet note to amend the Employees Provident Fund and Miscellaneous Provisions Act of 1952.
As per the proposed amendment, exempted trusts will manage only the PF accounts and deposit funds left after settlement of claims with the EPFO every month. At present, companies meeting the eligibility criteria are allowed to set up trusts to manage the PF contributions of their employees. This exemption, however, is subject to investment norms.
If the amendment is approved by the Cabinet and ratified by Parliament, exempted trusts would lose the right to invest the provident fund corpus.
Organisations representing the workers have welcomed the move. "This is certainly a progressive step because private trusts were not doing justice to workers' funds," Sankar Saha of the All India Trade Union Congress said. "The trusts were not making appropriate investments."
Last year, 42 companies managing their own provident fund accounts had protested against the EPFO's decision to raise the rate of interest on PF accumulations, saying they could not match the 9.5% interest declared for 2010-11. The EPFO had declared higher ininterest after it found a surplus of Rs 1,731 core in its interest suspense account.
These trusts had said that unlike the EPFO, they did not have surplus cash to pay the higher interest. They also said that their average yields in the past had been below 8.5%, the interest fixed by the EPFO in the previous five fiscals. This led the EPFO to order an examination of their accounts.