New Delhi: In a major overhaul of the operating procedures for exempted establishments under the Employees Provident Fund Organisation (EPFO), the government has moved to risk-based audit system from the current annual audit framework, restricted the declared interest rate by Trusts to be not more than 2% above the rate declared by EPFO for that year while allowing them to continue exemption post-merger or acquisition.
These key provisions are part of over half-a-dozen changes introduced in the simplified standard operating procedures (SOPs) approved by the central board of trustees of EPFO recently to strengthen the regulatory framework governing exempted trusts and enhance the ease of doing business for establishments as well as ease of living for its employees, a senior government official told ET.
The new standards operating provisions will be notified soon.
There are over 1,000 to 1,200 large companies, public sector undertakings (PSUs), and private organizations in India holding exempt status under the Employees’ Provident Fund Organisation (EPFO). Exempted establishments are those allowed under Section 17 of the EPF & MP Act, 1952, to manage their own provident fund (PF) trusts, but they must provide benefits equal to or better than the standard EPFO scheme.
As part of rationalisation of the audit system for exempted establishments, the EPFO will now audit high-risk or non-compliant establishments while compliant entities may not necessarily be audited each year. Further, to curb the practice of certain trusts declaring disproportionately high interest rates (even as high as 34%) when residual membership becomes very small, EPFO has capped the interest rate to not more than 2% above the rate declared by EPFO for that year. “This ensures financial prudence and prevents unusually high returns,” the official said.
Enhancing the ease of doing business, EPFO has now allowed exempted establishments to continue exemption post-merger or acquisition if they so desire and enable cancellation only upon voluntary surrender or pursuant to specific court directions. Besides, it has mandated such establishments to issue a public notice in newspapers in cases of surrender or cancellation of exemption to safeguard members’ interests, ensuring that all member accumulations are credited to their respective accounts and transfer of all inoperative or non-KYC accounts of exempted establishments at the time of cancellation or surrender to prevent misuse or irregular handling.
