Employee Deposit Linked Insurance (EDLI) scheme in EPF – A Snapshot
(Coffee Break Compliance Guide – Volume 49, by Subramaniam Anandan)
Employee Provident Fund & Miscellaneous Provisions (EPF & MP) Act is the largest Social Security Benefit Act enacted in 1952 which provides major long term savings scheme for the employees engaged in the private sector. To extend the benefits of life insurance, the government has introduced the Employees Deposit Linked Insurance Scheme (EDLI) in 1976, which becomes a part of the EPF Act.
The core benefit of the EDLI Act is, the registered nominee receives a lump-sum payment in the event of the death of the person insured, during the period of the service.
Salient features of the EDLI Scheme is:
- There is no requirement of separate enrolment for this scheme, as all PF members are automatically covered under the scheme once they become a member of EPF scheme.
- As the objective of the Scheme is to provide financial support to the families of the PF member in case of unfortunate demise of the member, there is no exclusion for any member from this.
- There is no minimum service required to avail the benefit
- Age or other individual factors do not affect the employee’s eligibility to be covered under EDLI scheme.
- The member is only covered by the EDLI scheme, as long as he/she is an active member of the EPF.
- The employer has to make the contribution for EDLI and no fee can be deducted from the employee’s salary
- Effective 15th February 2018,
- Assurance Benefit shall not be less than two lakh and fifty thousand rupees
- Provided further that the assurance benefit shall not exceed six lakh rupees
- The maximum average monthly salary of an employee is capped at INR 15,000
The following persons are eligible to claim EDLI scheme amount in case of the death of the employee
- Nominees made by an employee under Employees Provident Funds Scheme
- If no nomination subsists whole amount will become payable to the members of his family, in equal shares.
- No share shall be payable to the following family members:
- Sons who have attained majority
- Sons of a deceased son who have attained majority
- Married daughters whose husbands are alive
- Married daughters of a deceased son whose husbands are alive
- The widow and the child of a deceased son will receive the amount in equal parts.
- Legal heirs can claim the amount if there is no family members and no nominee registered
- In case of nominee is minor, guardian of the minor person can claim the amount
How EDLI is covered?
- Employer contributes for maximum of 0.5% of INR15,000 (Means maximum payable by employer is Rs 15,000 x 0.5% i.e. INR75 per month)
- Contribution by employee : NIL
- Contribution by employer : 5%
- Contribution by employer, in case the EPF covered establishment is exempted under EDLI Scheme : 0.005%, to a minimum Re.1/- as admin charges.
- In the case of a part-time employee who was a member of the provident fund while serving in more than one factory, the quantum of benefit under EDLI Scheme will be determined with reference to the average of the balance in his provident fund accounts during the preceding twelve months.
- The employer can opt out of the scheme in case he takes a higher paying life insurancescheme for employees under Section 17 (2A)
- In the above case, the EDLI shall be settled through the Insurer
How to claim EDLI?
- The Nominee or other surviving family members (whoever is eligible) shall apply in Form 5 IF along with the Form 20 (EPF withdrawal claim in case of the deceased member) and Form 10C/Form10D to claim benefits of all three schemes (EPF, EPS and EDLI) in one go
- The claim form has to be signed and certified by the employer
- In case there is no employer, the form has to be attested by any one of the following:
- Gazetted Officer
- President of Village Panchayat
- Chairman / Secretary / Member of Municipal or District Local Board
- Postmaster or Sub Postmaster
- MP or MLA
- Member of CBT or Regional Committee of EPF
- Bank Manager (of the bank in which the account was maintained)
How the amount is arrived at and payable to nominee?
- The average monthly wages drawn (subject to a maximum of fifteen thousand rupees), during the twelve months preceding the month in which he died, multiplied by thirty times
- Plus fifty percent of the average balance in the account of the deceased in the Fund or of a provident fund exempted under section 17 of the Act or under paragraph 27 or 27A of the Employees’ Provident Funds Scheme, 1952, as the case may be, during the preceding twelve months or during the period of his membership, whichever is less subject to a ceiling of one lakh and fifty thousand rupees.
- Provided that the assurance benefit shall not be less than two lakh and fifty thousand rupees and further that the assurance benefit shall not exceed six lakh rupees
Mr. James drawing a monthly basic of INR30,000 and the EPF balance was INR3,00,000. However in the last 12 months the EPF balance is INR2,00,000 only. Upon sudden demise the EDLI is computed as per the above:
(i). Monthly Wage x 30 times = 15,000 x 30 times : INR 4,50,000
(Wages can be considered for EDLI is maximum INR15000)
(ii). 50% of average balance in EPF (INR2,00,000)= 2,00,000/2 : INR 1,00,000
Total EDLI : INR 5,50,000
Nominee would get INR 3,00,000 (EPF) + 5,50,000 (EDLI) : INR 8,50,000
Mr. John drawing a monthly basic of INR10,000 and the EPF balance was INR2,00,000. However in the last two months the EPF balance is INR1,80,000. The computation is:
(i). Monthly Wage x 30 times = 10,000 x 30 times : INR 3,00,000
(ii). 50% of average balance in EPF (INR1,80,000)= 1,80,000/2 : INR 90,000
Total EDLI : INR 3,90,000
Nominee would get INR 2,00,000 (EPF) + 3,90,000 (EDLI) : INR 5,90,000