The Employees Provident Fund Organisation (EPFO) offers a comprehensive scheme that provides employees with several advantages. Account holders not only receive higher interest rates on their savings, compared to Fixed Deposits (FD), but also benefit from the government’s security guarantee. Additionally, the scheme provides free life insurance coverage worth lakhs of rupees. Private sector employees are mandated to establish a Provident Fund account (PF Account), with a specific sum deducted from their monthly salary and reserved for future needs. Employers also make contributions to this account. The EPFO oversees three simultaneous schemes: the EPF Scheme 1952, the Pension Scheme 1995 (EPS), and the Employees’ Deposit Linked Insurance (EDLI) scheme.
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All employees opening an account with EPFO are eligible for benefits under the EDLI scheme. This scheme provides term insurance of Rs 7 lakh on the PF account. In the event of an employee’s unfortunate demise, the family is entitled to Rs 7 lakh as insurance coverage. Importantly, while employees invest in the PF account and EPS, it is the employer who initiates investments in the EDLI scheme, ensuring that employees can avail themselves of its benefits.
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The EPFO instituted this scheme in 1976, including all companies within its jurisdiction. Employees can opt out of the scheme if they select a higher-coverage insurance plan; otherwise, they can avail the benefits of both plans. As part of the initiative, employers invest 0.5 percent of the employee’s basic and DA amount as a premium, with a maximum limit of around Rs 75. It’s crucial to emphasise that the scheme’s benefits are contingent upon sustained employment and active membership in EPF (Employees Provident Fund).
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EPFO offers insurance coverage up to 35 times an employee’s salary under the EDLI scheme. It’s important to highlight that the maximum monthly salary considered for this calculation is capped at Rs 15,000. Consequently, an eligible employee can receive Rs 5.25 lakh from EPFO through this scheme. Furthermore, the organisation provides an additional bonus of approximately Rs 1.75 lakh. In total, the initiative grants a sum of Rs 7 lakh as insurance coverage.
When employees open a PF account, they not only get insurance coverage but also enjoy higher interest rates on their deposits compared to Fixed Deposits (FD). For example, SBI, the largest government bank, offers an average interest rate of 7 percent on a 5-year FD. In contrast, a PF account provides an 8.15 percent interest rate, previously reaching up to 9 percent.
