The document discusses ideal employer pension policies from multiple perspectives. It argues that current mandatory contribution policies should be reformed to allow for more choice, portability, and sustainable retirement returns for employees. Specifically, it recommends unbundling regulatory and investment roles, allowing alternative funds like NPS, reducing restrictions on withdrawals to lower total contributions, regulating superannuation trusts, and eliminating arbitrage between different plan types. Overall reforms aim to expand coverage equitably while giving employers and employees more flexibility and control over retirement savings.

1. Providing an equitable opportunity
to
Organized Sector workers to maximize their retirement
savings
9th Annual IIEF Pension Policy Conference
New Delhi
Nov 9, 2009

2. Background
•MANDATORY
– Provident Fund 15.67% of salary
– EPS 8.33% of salary
– EDLI 0.55% of salary
– Gratuity 4.16% of salary
– EPFO Costs 4.58% of contribution
• VOLUNTARY
– Voluntary Provident Fund
– Superannuation 15% of salary

3. Ideal Employer Pensions
Policy Perspective
Myopia
Sustainable;
protection;
design abuse
defaults, leaks
Incentivized Coverage %;
Voluntary top-ups; Random caps,
VPF, SA exemptions
Competition/ Regulation &
Costs; Supervision;
EPFO dual role funded plans
Portability;
Dormant
accounts

4. Ideal Employer Pensions
Employer Perspective
Crystallized CTC
Liability; DC perspective
Transparent/ Costs; level,
Consistent bearer
Regulations
Registration/ Competition;
Compliance choice
Value for
Money

5. Ideal Employer Pensions
Employee Perspective
Moderate
Portability Mandatory
Deduction
Trusteeship &
Investment Returns Sustainability;
EPS
Asset Allocation Tax
Flexibility Efficient
Access/
Service

6. Change Agenda
• First presentation in 1997; status quo, tree
• Transmission losses, Holistic perspective
• Issue is a priority; kingdom expansion, obesity
• Default by EPS: birth defect, no capital return, no commutation, higher
early penalty
• Philosophy and Plumbing
• Woody Allen

7. Philosophy Changes
• Unbundle Investment, Regulatory and Admn roles
• Allow NPS alternative to employers for EPFO payments; Enforcement
• Eliminate loans and withdrawals but lower total contribution
• Make a call on EPS
• Regulate Superannuation and gratuity trusts
• Superannuation policy orphan because elitist; non-discrimination clause
• Eliminate arbitrage (tax, costs, etc) between trusts/ unexempt / unfunded
• Convert Gratuity to DC, Merge with PF

8. Plumbing Changes
• Code number allotment: Use PAN
• SBI remittances: branches, jurisdiction, other banks
• Window of Exemption for 3-6 months; no EPS or exempt, NCEUS
• Filing of compliance: simplify returns, e-filing
• Settlements and Workflow: simplify, no individual accounts, slips, SLA
• Exemptions
• Outsourcing legitimacy: TPA

9. Closing Thoughts
• Benefits Regime vs Labour Markets
– Unorganized vs. Organized employment; slavery of 21st century
– Direct consequences for firm and individual level choices; TL
– Need Backpack Benefits
– Need diversity; assumptions invalid e.g. TL, Middle of Road
– EPFO not service organization; no clients, investment hijack
– Next phase of reform is life in 4th decimal place; contracting, SLAs,
RAs for IT, CRM
• Way forward
– Unique Time in India
– Missed tryst with destiny; 300 million
– Biggest lesson of 18 years of reform; 3Es
– Unintended labour market consequences; geography, architecture
– Need open architecture, Competition, Portability, Diversity

10. Providing an equitable opportunity
to
Organized Sector workers to maximize their retirement
savings
9th Annual IIEF Pension Policy Conference
New Delhi
Nov 9, 2009