EPFO Rolls Out New Guidelines On Reserves And Surplus Funds For Exempted Trusts. Key Details Inside

The EPFO outlined how these reserves should be utilised to credit interest to beneficiaries, addressing concerns about equitable distribution

The Employees' Provident Fund Organisation (EPFO) has introduced new guidelines regarding the management of reserves and surplus funds in exempted establishments, aiming to ensure fairness and transparency in the handling of retirement savings.

In a directive sent to all regional provident fund offices, the EPFO outlined how these reserves should be utilised to credit interest to beneficiaries, addressing concerns about equitable distribution. This move comes after some exempted establishments requested permission to allocate surplus funds to beneficiaries at higher interest rates than those mandated by the EPFO.

These requests often arise during the surrender of exemption from EPFO regulations. Upon review, the EPFO found such practices problematic, indicating that inflated reserves suggest past earnings were not equitably distributed. The EPFO clarified that higher earnings should be reflected in the interest credited to all beneficiaries.

Interest Crediting Rules Clarified

Under the new guidelines, interest must be credited to beneficiaries on a monthly basis, starting from the last day of the financial year. However, no interest is to be credited for partial years. The interest rate credited to exempted trusts must be in line with the actual earnings of the fund, and overdrawing from reserves is strictly prohibited.

The EPFO also warned that any attempt to allocate reserves to a select group of beneficiaries violates trust laws and fairness principles, potentially triggering audits and compliance checks.

Transfer of Funds Upon Exemption Cancellation

In the case of exemption cancellation or surrender, all remaining funds, including undistributed interest, are to be transferred to the Central Board of Trustees (CBT) of the EPFO. The new order replaces previous circulars on the topic to ensure consistency and clarity.

The EPFO’s latest directives are designed to promote equitable treatment of all beneficiaries and ensure that surplus funds are managed in accordance with legal standards. Regional offices have been instructed to communicate these updates to the relevant establishments to ensure compliance.