EPFO New Rules: Rules Revised for Private PF Trusts; 2% Cap Imposed on Interest Rates..

The Employees' Provident Fund Organization (EPFO) has introduced significant changes to the regulations governing companies that manage private PF trusts. Under the new rules, a 2% interest rate cap has now been imposed on exempted establishments. Additionally, a risk-based audit system has been implemented to replace the mandatory annual audit requirement. The government states that these measures will safeguard the interests of employees and streamline regulatory processes for companies.

Under the new Standard Operating Procedures (SOPs), a ceiling has now been fixed on the interest rates offered by these trusts. According to the new regulations, no exempted PF trust shall be permitted to offer an interest rate exceeding the annual rate declared by the EPFO ​​by more than two percentage points. The government asserts that this step has been taken to maintain financial discipline and secure employees' savings. Citing a senior official, *ET* reported that some smaller trusts—due to having a limited number of members—were declaring interest rates exceeding 30%, thereby raising concerns regarding increased financial risk. This cap on interest rates has been imposed specifically to prevent such occurrences.

The second major change introduced in the regulations pertains to the audit system. Companies will no longer be subject to a mandatory annual audit across the board. The EPFO ​​will now conduct audits only for those companies where there is a likelihood of regulatory non-compliance or financial risk. This approach has been termed a "risk-based audit system." The government believes that this will reduce the unnecessary regulatory burden on compliant companies and facilitate ease of doing business.

**How ​​many companies operate PF trusts?**
There are approximately 1,000 to 1,200 large companies, Public Sector Undertakings (PSUs), and private organizations across the country that hold exempted status under the EPFO. Operating under Section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, these entities manage separate PF trusts for their employees. However, they are mandated to provide facilities and benefits that are equivalent to—or superior to—those offered under the EPFO's standard scheme.

The new SOPs also permit companies to retain their exempted status even following mergers and acquisitions. Furthermore, if a company voluntarily surrenders its exemption status—or does so pursuant to a court order—it is required to issue a public notice. The objective of this measure is to safeguard the interests of employees and to ensure that their accumulated deposits are securely transferred to their respective accounts. These new EPFO ​​regulations are set to be officially notified shortly. It is anticipated that these measures will enhance transparency within private PF trusts and render employees' retirement savings more secure.

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