Hello Everyone, in this post we will see a short introduction into what is a PF trust. We will cover the following topics:
- Introduction
- Benefits of a Private PF Trust
- Disadvantages of PF Trust
- Difference Between EPFO And PF Trust
- How to start EPF Private Trust?
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.
Disadvantage of PF Trust
The following are the disadvantage of PF trust.
- If an employer is opting to manage the PF trust, then employer’s responsibility will be increased, and the employer will be responsible for overseenig the entire fund which is collected from the employee as well as theemployer contribution. This will also need additional time and financial expertise to manage the trust.
- Whereas PF Trust offers greater investment flexibility, it also carries a higher risk of investment management as compared to the EPF. nvestment decisions by thetrustees may lead to losses and it could negatively impact the retirement savings of the employee.
- Managing proper financial institutions like a PF Trust is not easy to manage. Managing a financial institution one has to strictly comply with government rules and regulations. If you fail, then you may have to pay penalties or face legal issues.
- PF Trust is completely managed by the employer; there is no support from the government, which could be a concern for the employees.
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 or higher, 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 the end of this post. Share your views and opinions in the comment section below.
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21 Comments
Are there any rules to withdraw PF money once you leave a company which maintains PF trust? I don’t want to withdraw PF money and don’t want to transfer as well,
My age is 40 years and I am not joining to any new company, But I wanted to keep my PF money safe.
Can I request my company’s PF trust to keep my account inactive and raise a request to withdraw money in future?
NO, the maximum time period for a inactive account is 3 years. Later to which the account may be suspended. So it better to withdraw and invest in any other mode.
can a holding company create a PF trust for all group companies
A company is having its PF Trust. It refused to pay employer’s share of PF saying the employees above 60 years age are not allowed PF. Please confirm.
Plz update a grievance at EPFO as employer has to contirbute even for above 60 years employees.
My Company is maintaining PF Trust. Can my Company refuse to give my PF back on the reason that I did not give them requisite notice before leaving them.
Where can I file complaint
Yes, they can delay the payment but cannot deny it. Update a grievance to EPFO.
Is it mandatory for a private trust to necessarily deposit 8.64% of the employer contribution to EPFO or the trust can retain 100 % of the employer contribution in trust accont? Can anyone clarify, pl
Trust will retain the complete contribution
My old company was maintaining PF in a trust and i worked there around 6 years.
New one maintains it in RPFO and its been 8 months. I somehow got all pf transferred into new account.
Now if I withdraw the PF, will it attract any tax?
NO, as the overall service is above 5 years but your PAN has to be available and validated in the account
How do employees benefit of more interest rate than EPFO as they need to follow EPFO rate ?
सर हमारी कंपनी भी pf ट्रस्ट चला रही हैं वो पहले हमें आसान किश्तों में लोन दे देते थे अब बंद कर दिया क्या हम उनसे उस लोन सिस्टम को दुबारा चालू करने के लिये दबाव बना सकते हैं क्या ऐसा की नियम हैं।
Sir, the PF trust is an independent body so we cannot force any rule on them
Is there VPF max limit of 8% of the basic salary on PF Trust. where as the VPF max limit is 100% of the basic salary in EPFO
No, there is no such limit in PF Trust
PF Trust has to pay security deposit to Govt.
Very good information on PF Trust. Can we also know about some of the software that can manage PF trust related activities please.
Saral PayPack has the option. Please contact us for more information
It’s very nice great information for us.
Thanks for sharing me.
Thank you for reading and commenting. We are glad this blog was useful to you.