EPFO floats fresh guidelines on reserves and surplus funds with exempted trusts. Details here

The Employees’ Provident Fund Organisation (EPFO) has released updated guidelines pertaining to the supervision of reserves and surplus funds in exempted establishments.

In a directive distributed to all regional provident fund offices, the retirement fund body clarified the use of these funds to credit interest to beneficiaries and addressed issues surrounding fair distribution among them.

This order becomes significant in light of certain exempted establishments seeking approval to distribute surplus funds to recipients at interest rates higher than those established by the EPFO. 

These requests typically occur when applying for exemption from EPFO regulations. Upon thorough examination, the EPFO has identified these requests as problematic. An excess reserve suggests that previous profits have not been equitably distributed among all recipients. Any increase in earnings should be reflected in the interest rewarded to these individuals.

Interest Crediting for Beneficiaries

As per the fresh guidelines:

> Interest for beneficiaries must be credited monthly, commencing from the end of the financial year.
> No interest will be credited for partial years.
> The interest rate allocated to exempted trusts should reflect the actual earnings of the fund.
> Drawing from reserves in excess is prohibited.
> Any endeavor to distribute reserves among a specific group of beneficiaries goes against trust laws and fairness principles.
> Such actions may prompt audits and compliance checks to verify compliance with regulations.

Transfer of funds

Upon cancellation or surrender of exemption, any remaining funds, including undistributed interest, must be transferred to the Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO), the statement read.

This directive supersedes previous circulars on the same subject, ensuring that all parties involved are in line with the updated regulations.

EPFO's latest guidelines are designed to promote fairness and transparency in overseeing the reserves and surplus of exempted establishments. These rules guarantee that all beneficiaries are treated fairly and that surplus funds are managed in accordance with legal requirements. 

All regional offices are required to inform relevant establishments about these updates for proper compliance, as stated in the EPFO directive.