Insurance Benefit for employees through Employee Deposit Linked Insurance Scheme (EDLI)
Here is all about Insurance Benefit through Employee Deposit Linked Insurance Scheme (EDLI):
Most of the Employees are not aware that their employer also makes a contribution towards Pension Scheme (EPS) and Employee Deposit Linked Insurance Scheme (EDLI) apart from Employee Provident Fund (EPF). EPS and EDLI are social security schemes that are clubbed with EPF. The post below will take you through detailed information on Employee Deposit Linked Insurance Scheme (EDLI).
What is Employee Deposit Linked Insurance Scheme (EDLI)?
Central Government of India launched “Employees Deposit-Linked Insurance Scheme, 1976” as per the provisions under sub-section (2) of section 16 and section 17(2A) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The scheme came into effect on August 1, 1976, and applies to the employees of all the factories & other establishments to which the above act applies.
EDLI gives a life cover to the employees working in the organisations that are part of the EPF and provides “Assurance Benefit” to the nominee/nominees of the employee upon the death of the employee during the service tenure. Assurance Benefit is a payment linked to the average balance in the PF account of an employee. An employee who is part of EPF will automatically be subscribed to EDLI by his/her employer. In fact, the employee will be mandatorily subscribed to all three schemes i.e. EPF, EPS and EDLI.
Contribution towards Employee Deposit Linked Insurance Scheme (EDLI)
Every employee who is part of EPFO contributes a certain percentage from his basic salary towards his EPF account. Earlier, the contribution in EPF was calculated on Rs. 6,500. This limit was increased to Rs. 15,000 in June 2016. A similar percentage is contributed by the employer as well. Apart from EPF, an employer also contributes towards EPS and EDLI.
The contribution towards EDLI is done by the employers under sub-section(2) and sub-section(3) of section 6C of the Act, and is calculated based on the basic wages, dearness allowance and retaining allowance, if any, actually drawn during the whole month whether paid on weekly, daily, fortnightly or monthly basis. The employer contribution in the scheme is equal to 0.5% of the total wages paid to the employee. The employer also needs to deduct the administrative charges equivalent to 0.01% of the total wages subject to a minimum of Rupees 2 per month. Below table illustrates the distribution of employer’s contribution under various schemes:
Features of Employee Deposit Linked Insurance Scheme (EDLI)
• The coverage is available for entire 24 hours in a day i.e. during as well as after the working hours.
• EDLI covers all the employees who are part of EPF and are automatically enrolled to the scheme.
• Irrespective of the location of the death i.e. whether the person dies inside the work premises or outside the workplace, coverage is available.
• There are no expulsions under the scheme.
• Coverage and premium is equivalent to all the employees irrespective of the factors such as age, gender.
• Employees will be covered under the scheme from the first day of their job.
Note: The previous condition of completion of at least one year of the service for the contribution in EDLI has been debarred.
Also read: EPF withdrawal rules 2016 & Complaints
Life Insurance Cover under Employee Deposit Linked Insurance Scheme (EDLI)
Life insurance coverage is calculated on the basis of the average monthly wages. Wages here refer to the basic salary plus dearness allowance (Wages = Basic + DA). The maximum average monthly salary for the contribution in EDLI is set to Rs. 15,000 from June 2016 and the maximum insurance benefit payable to the nominee of the employee under the scheme is Rs. 6,00,000 in the event of the death of the employee.
The maximum insurance benefit is calculated based on the average monthly wages drawn during the twelve months preceding the month in which the employee dies, multiplied by 30 times. Also, a bonus equivalent to fifty percent of the average balance in the fund of the deceased person’s account or of a provident fund exempted under section 17 of the Act or under paragraph 27 or 27A of the Employee Provident Fund Scheme, 1952, as the case may be, during preceding 12 months or during the period of his membership, shall be payable subject to a ceiling of Rs. 1 ,50,000. Also, the total ceiling under the scheme is Rs. 6,00,000.
Procedure to claim the Assurance Benefit
• The nominee or nominees or other claimants will have to send a written application to the Commissioner through the employer in Form 5(IF), to claim payment under this Scheme.
• The form has to be filled up separately by each claimant.
• If the claimant is a minor, the form should be filled up by the guardian on minor’s behalf. If there are more than one minor the guardian should claim using one Form on their behalf.
• Details of the deceased such as Name, Father’s Name (Husband’s name in the case of married woman), Date of Death (dd/mm/yyyy), Name and Address of the Factory/Establishment where the member was last employed and Provident Fund Account No has to be filled up in the form.
• In addition to this, claimant/guardian has to fill their Name, Date of Birth (dd/mm/yyyy), Relation with the deceased, Claimant’s Full Postal address (in block letters).
• If the claimant is a guardian, details of the ‘minor nominee/heir’ such as Name of the minor and Relationship with minor has to be furnished.
• Mode of remittance also needs to be furnished and the claimant needs to attach a copy of cancelled/blank Cheque.
• The required documents to be attached along with the form are death certificate of the deceased, guardian certificate if the claim is made by the person other than the natural guardian, succession certificate if legal heir makes the claim.
• If the member was last employed with an establishment exempted under the EPF Scheme 1952, the employer has to furnish the PF details of the past 12 months under the certificate part and is also required to mail an attested copy of the Member’s nomination form.
Note: The claims, completed in all respects submitted along with the requisite documents will be settled and paid to the beneficiaries within 30 days from the date of its receipt by the Commissioner.
How will the Assurance Benefit be paid?
Assurance benefit shall be payable as per the scenarios listed below:
1. The nomination done by an employee under Employees Provident Funds Scheme, 1952, or as per the provident fund exempted under section 17 of the Act, based on the case, can be considered as the nominations under this Scheme and the assurance amount can be paid to such nominee or nominees.
2. In the absence of nomination, or if the nomination relates only to part of the outstanding amount to the credit of the deceased employee in the Fund or of a provident fund exempted under section 17 of the Act, the entire amount or a part thereof to which the nomination does not relate, on the basis of the case, shall become payable to the members of the deceased employee’s family in equal shares, subject to the condition that no share will be payable to –
(a) Sons of a deceased son who have attained majority;
(b) Sons who have attained majority;
(c) Married daughters of a deceased son whose husbands are alive;
(d) Married daughters whose husbands are alive;
In case of any member of the family other than those specified above; the child or children of a deceased son and the widow or widows, shall receive between them in proportionate parts only the share which that son must have received if he had survived the employee and had not achieved the age of majority at the time of his death.
3. If the above two scenarios are not applicable, then the assurance benefit will be paid to the legal heir of the deceased.
4. If a person eligible to receive assurance benefit of the deceased member in any of the three scenarios mentioned above is charged with the misdeed of murdering the member or for assisting in committing such an offence, his claim to receive assurance benefit shall be suspended till the cessation of the criminal proceedings instituted against him. If on the conclusion of the criminal proceedings, the person concerned is:
(a) Convicted of the murder or abetting the murder of the member, he shall be excluded from receiving his portion of deposit linked assurance benefit which shall be payable to other eligible members of any of the family; or
(b) Released from the charge of murdering or abetting in the murder of the member, his share shall be payable to him.