Employee Provident Fund: Nomination rules of your retirement kitty
The Employees Provident Fund (EPF) forms the backbone of saving needs for most salaried individuals. In addition to serving as the nest egg for most private sector employees, this fund offers other benefits like financing life insurance policies to availing a loan. A few years ago, the Employees’ Provident Fund Organisation (EPFO) even ruled that partial early withdrawal can be permitted on occasions like child’s marriage, higher education, paying for a house or financing for certain illness. In fact, EPFO has even changed rules for withdrawal in the event of loss of a job. Members are allowed to withdraw 75% of the accumulated corpus after a month of termination of service. For unemployment of two months, the members have the option to withdraw the remaining 25 per cent and avail the final settlement.
In light of the evolving changes, it is more imperative now than ever to know the rules associated with EPF. Here are some rules related to nomination and payments related to the fund.
Rules related to the nomination:
- The EPFO member needs to nominate a member to receive the amount standing to the credit of fund in the event of his death before the amount standing to his credit becomes payable.
- The members of EPFO have the right to distribute the amount standing to their credit in the fund amongst their nominees at their own discretion.
- Also, the nomination shall be made in favour of one or more persons belonging to the family. The nomination made in favour of a person who is not a family member is invalid. A fresh nomination shall be made by the member on his marriage.
- However, in a situation where the member does not have a family, the nomination may be in favour of any person or persons. In a situation where the member of EPFO acquires a family, then nomination shall forthwith be deemed invalid and a fresh nomination shall be made belonging to the family.
- If the nomination is in favour of a minor, then the member shall appoint a major person of the family to be the guardian of the minor member in the event of the member predeceasing the nominee and the guardian so appointed.
- The nomination made while becoming the member of the EPFO may be modified by a member after giving a written notice of the intention to do so.
In a situation where the nominee dies before the member of the EPFO, the interest of the nominee shall avert to the member. The member shall make a fresh nomination in respect of the same.
Financing members’ Life Insurance policy
- The provident fund account can be used to finance the life insurance policy’s premium. It shall be applied in such a manner as prescribed by the commissioner.
- The commissioner or any other officer subordinate to him will make the payment on behalf of the member of LIC towards the premium due on the policy.
- The payment is made only if the premium is payable yearly.
- The fund restricts financing education endowment policy or marriage endowment policy if the policy is due for payment in whole or in part before the member attains 55 years of age.