Hello Everyone, in this post we will see a short introduction into what is a PF trust. We will cover the following topics:

Introduction

The Employees’ Provident Scheme (1952) came into effect to ensure social security for workers in both the organized and unorganized sectors.

The companies have to contribute to the Employees’ Provident Fund Organisation (EPFO) trust towards the EPF fund.

But some companies can also manage their own private PF trust if they acquire the exemption from the government.

There are 1,375 companies in India like TCS, Wipro, Hindustan Unilever (HUL), Reliance and public sector organizations like Bharat Heavy Electricals (BHEL).

So, the private PF trusts function according to the same rules as the EPF and the member get their UAN (Universal Account Number).

Benefits of a Private PF Trust

  • It is more efficient: Members need to pay only 0.18% rather than 1.1% for an administration charge.
  • It has higher returns: It can declare a higher interest rate than the EPF.
  • Better service: In terms of customer satisfaction EPFO service is slow and poor. It can provide better service for its members.

Difference between EPFO and PF trust

EPFO (Employee Provident Fund Organization) Private PF Trust
An autonomous social security body of the central government. A trust authorized by the EPFO.
Under the Ministry of Labour. Under EPFO.
Deals with collecting, maintaining and disbursing amounts to Employees of the covered organizations/ establishments. Maintain PF provident fund accounts of employees of a company.
Establishments that recruit 20 or more employees deduct 12% contribution from Employees’ salary(Basic+DA+retaining allowances if any) on a monthly basis. It is remitted to the EPF fund through notified banks along with the employer’s equal share. Both the employer and employee of PF trust contribute 12% of their wages to the PF. 8.67% of the 12%employer contribution is allocated to the Employees’ Pension Scheme (EPS) which is managed by the EPFO and not the exempted PF trust.
The deductions made has to be consolidated and returns to be submitted to the Regional Provident Fund Organization. Trust has to maintain PF accounts, regularly remit pension contributions of the members to the EPFO, issue annual accounts slips and distribute the PF amount in situations like death, retirement, resignation, etc.
Maintains PF accounts on receipt of information and remittances from the employers. Submit a periodical report to the EPFO for the accounts maintained by it.
Only the EPFO can sanction pension to the members of the PF Trust. They can frame their own rules and regulations for the maintenance of PF accounts but it should be based on relevant PF rules.
It has to give interest to the members at the rate declared by the EPFO every financial year.
The Trust has to pay the Deposit Linked Insurance benefits to the members’ nominees in the event of the death of the members.

For example: Imagine a co-operative bank can run banking operations with the permission of the Reserve Bank of India. So now think of EPFO in place of RBI and the PF Trust in place of a cooperative bank.

How to start EPF Private Trust?

An organization submits an application to the Government to exempt it from the statutory PF scheme, through the jurisdictional Regional PF Commissioner.

The companies can run their own PF schemes at a number of conditions when they get permission from the Government.

One of these is the guarantee at the rate of return on the PF amount compared to the EPFO PF scheme. If the government accepts then the company will get permission to run its own PF scheme.

It can be for all the employees of the company or for a specified class of employees (e.g. managerial staff).

Therefore, the organization has to create a board of trustees for the governance of the PF scheme and ensure the smooth transaction between the entity and the trust.

The company is also responsible for any negative impact (fraud, defalcation, wrong investment) towards trust. Multiple companies can also be part of a single PF trust.

Note:

The company has to pay an inspection charge of 0.18% of wages instead of the administrative charges of 1.10% of the wages.

So, the company has a cost saving of 0.92% of the wages.

With this, we have come to an end of this post. Share your views and opinions in the comment section below.