EPF pulls back on some benefits for private sector workers
View(s):The Employees Provident Fund (EPF) is to pull back some EPF benefits for private sector employees since the fund anticipates a negative cash flow due to increasing withdrawals by retirees.
The 30 per cent EPF loan facility, one of the benefits granted for private sector employees before they reach retirement age of 55 years for medical treatment or housing, has been pulled back due to cash flow fluctuations in the fund, informed sources said.
This facility was approved by the cabinet in 2010 following a pledge given by the President in 2008 September at the EPF Golden jubilee anniversary ceremony. However the relevant legislation was passed in parliament only a few months ago and the implementation of the loan scheme was delayed due to administrative procedures connected to it, Minister of Labour and Labour Relations Gamini Lokuge told the Business Times. It was about to be implemented soon.
Secretary of the Free Trade Zone and General Workers Trade Union Anton Marcus said that the reason for the failure to implement the loan scheme was the shortage of money in the EPF.
This situation has arisen as a result of financial misappropriation and malpractices which were also highlighted by the Auditor General recently, he added.
The employers’ contribution to the EPF in 2011 was Rs. 61.9 billion with a sum of Rs. 47.3 billion being withdrawn to pay back EPF money for retirees and this amounted to 76 per cent of the total contribution, official data revealed.
Also in 2011 there was an increase in withdrawals to 120,000 applicants, up from 104,524 in 2010.
In 2012 and 2013, 115,000 and 114,000 applicants had withdrawn Rs.48.7 billion and Rs. 50.2 billion, respectively. Employers’ contribution for EPF in 2012 was Rs.70.6 billion and in 2013 the contribution was Rs.80.9 billion.
Withdrawals as a share of contributions fell to 69 per cent in 2012 and 62 per cent in 2013.
When cash flows of the EPF turn negative which means the contribution of employers and the returns of investment of the fund is less than the amount of withdrawals, the authorities will have to generate funds from other means to finance the repayment.Anticipating this situation, discussions are underway at the top level to amend the EPF Act, making provisions to provide refunds for its beneficiaries on an installment basis, rather than on a ‘once and for all’ basis, which is the normal practice, informed sources said.
Amidst alarming revelations of misusing funds, malpractices and losses in investments made in the stock market by the Employees’ Provident Fund (EPF), trade unions are demanding an independent body to manage the fund, Mr. Marcus said.
| Irregularities of EPF funds highlighted in the Auditor General’s 2011 report
1. Failure to credit to accounts of relevant individual members a sum of Rs. 4,671 million recovered from employers as arrears of EPF contribution installments on court orders in cases filed by the Labour Commissioner General on 31st December 2011. |