Refund of Employee's Share Under NPS in Death or Disability Cases

The Government of India has issued a detailed office memorandum regarding the refund of an employee’s share along with returns in cases involving Central Government employees under the National Pension System (NPS). The notification, issued by the Ministry of Personnel, Public Grievances and Pension, Department of Pension and Pensioners’ Welfare, outlines the procedure for availing benefits under the Central Civil Services (CCS) (Pension) Rules, 1972, or CCS (Extraordinary Pension) Rules, 1939, in the event of death or disablement.

Background of the Notification

The National Pension System (NPS) was introduced by the Ministry of Finance in 2003, mandating that all Central Government recruits appointed after January 1, 2004, would be covered by NPS. The CCS (Pension) Rules, 1972, and CCS (Extraordinary Pension) Rules, 1939, were made applicable to Government servants appointed on or before December 31, 2003.

However, due to the hardships faced by employees covered under NPS in cases of death or disability, provisional benefits under the CCS (Pension) Rules were extended in 2009. These provisional benefits, as outlined in Office Memorandum No. 38/41/06/P&PW(A) dated May 5, 2009, were subject to adjustment based on subsequent rules.

Procedure for Refund and Transfer

The recent notification provides an updated framework to deal with such cases, highlighting that family members of a deceased subscriber or an employee discharged due to invalidation or disablement may avail the benefits provided by CCS (Pension) Rules, 1972 or CCS (EOP) Rules, 1939.

Upon availing these benefits, the accumulated NPS corpus of the subscriber will be transferred into the Government account. Only the Government’s contribution will remain in the Government account, while the employee’s contributions, with the returns thereon, will be returned to the legal heir(s) or nominee(s) with interest.

The interest will be calculated from the date of death or boarding out up to the date of payment, at rates similar to the Public Provident Fund (PPF) rates. All Ministries and Departments have been directed to bring the contents of these orders to the attention of relevant authorities for appropriate action.

Applicability and Implementation

These orders are effective retrospectively from January 1, 2004, and will apply to all Central Government employees covered under NPS, who have opted for pension benefits under the CCS (Pension) Rules or the CCS (EOP) Rules.

In cases where the Government servant or their family members have availed of benefits under CCS (Pension) Rules while also having accumulated pension under NPS, the Government will require a refund of any overlapping amounts. The interest rate and manner of such refunds will be in line with the General Provident Fund (GPF) rates.

Accounting and Verification Procedures

The detailed accounting procedure is attached as Annexure-A to the office memorandum. The Principal Accounts Office (PAO) will be responsible for making necessary entries, calculating interest, and ensuring the correct bifurcation of contributions between the Government’s share and the employee’s contribution.

The Head of the Office/ Drawing and Disbursing Officer (DDO) must ensure that the details of the NPS accumulations are verified against the records maintained by the National Securities Depository Limited (NSDL) and Government accounts prior to payment.

The refund will be managed by debiting the relevant Government Deposit head for NPS and crediting the accumulated amount along with interest to the nominee or legal heir. This ensures that there is transparency and clarity in processing such refunds.

Key Takeaways

Applicability: The orders are effective for all Government employees covered under NPS since January 1, 2004.
Refund of Contributions: Employee’s share along with returns will be refunded to the nominee/legal heir, while Government contributions will be retained in the Government account.
Interest Calculation: Interest will be calculated as per PPF rates from the date of death to the date of payment.
Responsibilities: PAO and DDO will play key roles in ensuring the correct bifurcation, calculation of interest, and processing of refunds.

Conclusion

This recent memorandum is a significant step in addressing the concerns of Central Government employees and their families regarding pension benefits under NPS. By allowing the refund of the employee’s share with interest and setting a clear process for its implementation, the Government aims to ease the financial difficulties faced by families during unfortunate circumstances such as the death or disability of a Government servant.

OM issued by DoPPW