EPFO to launch PF number portability on 23 September

New Delhi: The Employees Provident Fund Organization (EPFO) is likely to launch its scheme to make provident fund numbers portable ahead of schedule on 23 September, a move it believes will help it “turn the corner” as a retirement fund manager for millions of salaried employees.

Its implementation, the labour ministry believes, will mark a “paradigm shift” for workers who save 12% of their basic salary (excluding perquisites and allowances) every month through EPF scheme as post-retirement savings. The employer has to make a matching contribution.

The roll-out of the provident fund (PF) number portability will come three weeks ahead of schedule, two government officials said, giving workers ability to manage and access their pension funds with the ease of core banking services.

Prime Minister Narendra Modi is likely to launch the facility two days ahead of the birth anniversary of Deendayal Upadhyaya, a leader of the Bharatiya Jana Sangh, the forerunner of the Bharatiya Janata Party (BJP).

“Earlier it was planned to be on Deendayal Upadhyaya’s birth anniversary (25 September), but now it’s been brought forward by two days. It shall be part of the anniversary celebrations,” said one of the two government officials cited above. Both requested anonymity.

In the last one month, nearly 26 million subscribers have complied with the know-your-customer (KYC) norms.

Employers are required to update workers’ bank account numbers along with the Indian financial system code, permanent account number (PAN) and Aadhaar unique identity number as part of KYC compliance process to make their employees eligible for PF number portability facilities.

Nearly 10 million more active subscribers are expected become KYC-compliant in the next three weeks, said the first official cited earlier.

“The day we launch the PF number portability, it will be a watershed day for EPFO and the labour ministry. It’s a long-pending initiative that will make EPFO an employee-friendly organization, taking care of their retirement corpus in a transparent manner. Earlier, EPF was seen as an archaic scheme under an archaic organization and this portability will reform it completely,” said the second official.

The PF number portability is designed to streamline EPF and employees’ pension scheme by allocating a single PF number to an employee for the length of his or her professional life, regardless of where they are working.

“Once you are KYC compliant, you don't need the employer for the PF claim settlement process. Pensionary benefits will be calculated automatically and it’ll club several PF accounts, reducing hassle for an organized sector worker,” said K.K. Jalan, central provident fund commissioner. Jalan said that KYC compliance will allow PF accounts to be updated on a real-time basis and that every month when an employer deposits the employees’ provident fund, the subscriber will get an SMS—much like the way bank accounts function.

“So dealing with EPFO will become as smooth as a bank,” he asserted. He, however, said that while the EPFO are accepting all bank accounts as part of the KYC format, cooperative banks are being excluded because they do not have core banking facilities.

In order to make the process smooth, employers and employees have to comply with KYC norms. However, despite rolling out PF number portability, EPFO will allow manual operation of PF transfers and other activities both through paper and online formats so that those who are not KYC complaint do not face any difficulties.

Once PF number portability is in place, establishments would benefit by making savings in human resources and revenue deployed to do the manual work related to claim settlements, transfers, etc, the first official cited above said.

The new scheme is set to stand out as one of EPFO’s best reforms that will benefit both workers and companies, according to Sushanta Sen, special advisor to industry lobby Confederation of Indian Industry (CII).

Workers will know that like a bank account, the PF number is one stable number, while employers will be provided a transparent and effective way to deal with the EPFO, he said, adding the scheme will come as a huge help, particularly to construction workers and others who are in floating jobs, who often miss out on claiming provident fund payments that are due to them.

EPFO manages a retirement corpus of more than Rs.6 trillion, which has grown a litte more than 16% in 2013-14 from the previous fiscal year.