The Ministry of Labour and Employment in its press release dated April 12, 2016 shared that the Employees Provident Fund Organisation (EPFO) settled 118 lakh claims in the Financial Year 2015-16, out of which 39% were settled within 3 days, 79% within 10 days and 96% within 20 days.

The above figures bring a smile on the face of every individual. After all, who doesn’t want a quick redressal of his/her query? Especially when it’s your hard earned money and you are pressed for cash.

Earlier, through a notification issued on February 10, 2016, the government had proposed to change the rules to withdraw the accumulated balance in the EPF account on unemployment suggesting implementing it by May 1, 2016.

However, under fire from the common man and the labour unions, the Union Minister for Labour and Employment, Mr. Bandaru Dattatreya, decided to cancel the proposed notification issued on February 10 and continue the old system after discussing it with all the stakeholders.

This is PersonalFN views on the impact that the proposed notification would have brought, had it been implemented on May 1, 2016.

If you are unable to recollect the changes the government had proposed, here’s a summary:

These changes would have made it difficult to withdraw your entire EPF balance on unemployment especially when you may need it the most. To help sink in the impact, let’s look at a hypothetical scenario.

Mr. A, B, and C worked for the past 20 years and are members of the Employees Provident Fund Organisation. However, they have been unemployed for over 2 months. They were in need of money and decided to withdraw their accumulated EPF corpus.

If you were to lose your job and were unemployed for 60 days, the old rule allowed you to withdraw the entire corpus (as shown in “j”). However, under the proposed amendment (which was to come into effect from May 1, 2016) you wouldn’t have this liberty. You would have ONLY been permitted to withdraw your contribution (i.e. employees’ contribution), along with the interest earned thereon (as shown in “k”).

The balance (i.e. employer’s contribution) (as shown in “h”) would be available for withdrawal at the time of retirement. However, the remaining employer contribution lying in your account would earn interest till then.

Although the proposed amendment was intended to make India a pension based society, it appears that consensus could not be achieved and a roll back was evident.

We may not know what is in store for the future; with changing times and circumstances, a new government may come up with a proposal that may change the rules of the game. Rather than crying foul, at that time, consult a financial planner to navigate through life’s uncertainties.

“There’s ALWAYS something coming in a few months that will cost money. So be prepared!”—Dave Ramsey
 

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