Group

Insurance
• Insurance purchased by a group of persons,
such as employees of a company, trade
unions, associations etc., often at a reduced
individual rates.
• Insurance that covers a group of people,
usually who are the members of societies,
employees of a common employer or
professional in a common group.
 Purpose
• Available to groups with central
administrative point

• Gained popularity as employers have

appreciated the importance of welfare
benefit for their employees
 EVOLUTION
• Industrialisation
• Organised Labour (Unionism, need to
provide a variety of benefits on a COST
EFFECTIVE way)
• Cost Advantage
• Inflation
• Legislations
 FEATURES OF GROUP
INSURANCE
• MASTER CONTRACT
• PREMIUM PAYMENTS
Contributory
Non - contributory
• EXPERIENCE RATING
Loss experience into consideration
• ELIGIBILITY CONSIDERATION
Stability
Determination of Benefits (should not generate
conflicts between employer and employee)
Purpose for existence
 FEATURES OF GROUP
INSURANCE ( contd..)
• Eligibility Consideration
• Administration
Premium ( proportion of both, the employer and employee)
Composition (age, sex, income, level in the management etc)
Industry (Occupational hazards and turnover rate in the
industry)
Geographic Location
Persistency
 Importance of Group Insurance
• Benefit to the Employees :
Low Cost
Employee reach
Flexibility
Tax Deductions
Job Satisfaction
 Importance of Group Insurance
• Benefit to the Employers :
Retention
Public Image
Tax Benefit
Available to all types irrespective of size and
no. of employees.
 Importance of Group Insurance
• Benefit to the Employees :
Low Cost
Employee reach
Flexibility
Tax Deductions
Job Satisfaction
 Employee Benefit Schemes
• It includes everything that an employer made
available/provided to the employees, other than
direct wages and cash bonuses, including
government-mandated benefit and perks, etc.
• Initially it was confined to all that an employee
requiring in situation like death, accidents,
sickness, retirement and unemployment.
• But now it includes Programs such as ,
Social Security
Unemployment Compensation Insurance
Worker’s Compensation Insurance
Non-occupational Disability Insurance
• Benefit against personal loss exposures such as ;
Old age, Death, Disability, Medical Expenses, Legal Expenses,
Property and Liability loss
• Payments for time not worked, such as;
Vacations, holidays, maternity leave etc.
 Importance of EBS
• EBS make provision against economic and social
distress caused to a person and his dependents on
stoppage of income resulting from sickness,
injury, invalidity or death or retirement.
• Long term relationship between employer and
employee
• EBS includes Provident Fund, Pensions, Gratuity,
Leave encashment, Insurance, Accidental Benefit
etc.
• EBS boosts morale of the Employee and hence
more productivity
 Objectives of EBS
• EBS gives the employee an adequate
financial Security in two kinds of
emergencies,
Premature death while on service and
On retirement.
FORMS OF EMPLOYEE RETIREMENT BENEFIT

• Provident Fund
• Employees’ Depository-Linked Insurance
Scheme (EDLIS)
• Gratuity
• Employees’ Pension Scheme
 PROVIDENT FUND
• PF is a lumpsum amount accumulated over
a period of service of employee, and is paid
on retirement/death/resignation of the
employee.
• Both employer and employee contribute
• Defined Contribution, Fixed by Govt.
 Four Types of PF Schemes
• Employee Provident Fund Scheme
• Recognised Provident Fund
• Provident Fund Scheme of Govt.
Employees
• Public Provident Fund
 Employee Provident Fund Scheme
• EPF Act was passed on 4th March, 1952
• Later amended and ‘EPF and Miscellaneous
Provision Act, 1952’ came into existence
• This act basically provides for three schemes
for employees,
a) EPF
b) EPS (Employee pension scheme)
c) Employee Deposit Linked Insurance Scheme
 Applicability
• The Employees' Provident Funds and Miscellaneous Provisions
Act extends to whole of India except State of Jammu and
Kashmir.

• The Act Applies to industries specified in Schedule I

employing 20 or more persons and any other class of
establishments employing 20 or more persons notified by the
Government.

• The Government may apply the Act to establishments

employing less than 20 people.

• Employees covered under the act include contract labour but

exclude apprentices, trainees, directors, working partners,
domestic servants and contractors.

• Establishments can seek exemption from any or all the

provisions of the act
 Contributions
• The employer and employee need to contribute an
equal amount.
• Current rate is fixed at 12% for both employer and
employee.
• An employer to whom the act applies is liable to
pay every month both his share and employee’s
contribution to the regional provident fund
commissioner who is responsible for the
management of the scheme, investment of the
contributions and disbursement of the benefits
when due in accordance with the rules of the
scheme.
• The contribution need to be remitted to EPFO
office within 15 days from the date of deduction
made.
• The rate of 10% is fixed for sick units declared by
BIFR, for establishments with accumulated
financial losses exceeding their net worth, and for
establishments engaged in beedi, jute, brick, coir
spinning and other sectors.
• Central Board of Trustees, is a body appointed by
the Govt. of India having representatives of
Employers’ associations, trade unions, PSUs etc.,
which monitors the EPFO as well.
• The Act also allows exemption under IT Act,
1961.
 Benefits
• The primary benefit under the EPF scheme
comprises payment of total contributions along
with the interest earned on them to employee or
the beneficiary in the following cases:
1. On retirement
2. Retirement due to permanent and total incapacity
for work on account of physical or mental
disability
3. Migration from India with the intention of
permanent settlement abroad
4. Termination of services
 Nomination
• A member can nominate to whom the
balance of PF account would be payable in
case of his death.
• A nominee has to be a family member, if
not, then the member can nominate non-
family person.
• If nomination is not done, the balance in the
account is equally distributed among the
family members
 Administration
• CBT
• SBT, in case of State Govt
• A chairman and vice-chairman appointed by the
Central Govt
• Central PF Commissioner
• Five Members appointed by the Central Govt,
within its officials
• Up to 15 members on behalf of State Govt., on
behalf of State Govt
• 10 Members on behalf of employees of covered
establishments, appointed by the Central Govt,
after consultation with employees’ organisations.
• An executive committee and a regional committee
are also appointed by the central Govt to support
CBT.
 Three separate accounts maintained by
EPFO

1. Provident Fund Account

2. Central Administration Account
3. Interest Suspense Account
• Actions for Defaults
Section 7 of EPF & MP Act, 1952 empowers
the central PF commissioner conduct
enquiry and recover dues.
Section 7Q, states that such delay in making
payments need to pay the dues along with a
simple interest at the rate of 12%
According to section 14, an establishment that
evades payments of dues deliberately is
punishable with imprisonment for a term up
to one year and/or a fine of Rs. 5000.
 Taxation
• Employees’ contribution: Employees are
eligible for Tax rebate under section 88 of
IT Act, 1961.
• The Income accrued on the contribution is
also tax free.
• The full amount withdrawn before 5 years
of service is taxable.
• Employer’s Contribution :
Employers are also eligible for Tax rebate
under section 17(1)(a) and 17(1)(b).
 Recognized Provident Fund
• A RPF has to be established under an irrevocable trust and
administered by not less than TWO TRUSTEES appointed
by the employer.
• The trustees are responsible for administering the funds in
accordance with the rules of the funds.
• They have to invest the money in the prescribed manner,
scrutinise withdrawal applications and grant withdrawals,
make settlement and take care of management of fund.
• The trust deed and the rules of the fund will require
approval by the commissioner of the Income Tax under the
part ‘A’ of the 4th schedule of Income Tax Act, 1961.
• Tax Rebate for RPF is under section 80 C
• No law defines the contribution (minimum
or maximum) of employer or employee.
• The employer contribution should exceed
the employee contribution.
• The trustees are obliged to administer the
fund free of cost but can appoint an
accountant or secretary for day-to-day
administration.
• Investment: Section 418 of companies Act specifies that
all PF money should be kept in separate account and the
funds which are not required immediately have to be
invested in accordance with the section 20 of Indian Trust
Act, 1962.
• Payment: On termination of service or upon his/her death,
to his dependents.
• Withdrawals: Refundable – For marriage, ceremonies and
expenses because of damage to the properties.
Non-Refundable – These funds are granted for housing and
insurance.
• Nomination: Provident Fund Act, 1925 specifies that if
the subscriber nominates one or more amongst his
dependants, the accumulated balance will vest in nominee
upon his/her death, free from any debt or charge created by
the member or any of his dependants.
 Provident Fund Scheme of
Government Employees
• Two Types:
General Provident Fund (GPF) – For those employees who are entitled to
pension as per service condition.
Contributory Provident Fund (CPF) – For those who are not eligible for
pension as per the service condition.
• The minimum rate of contribution in GPF account is 6%, while this can be
increased.
• In case of CPF, employer contributes 10% of basic salary apart from the
contribution of employee which can be less than 10%.
• Under GPF and CPF, Govt of India established provident fund schemes
through the following acts,
The Coal Mines PF Act and Miscellaneous Provisions Act, 1948.
Assam Tea Plantation PF Scheme Act, 1955
The Seamen’s PF Act, 1966 and
Other PFs under the Provident Fund Act, 1925 under the over sight of Income Tax
authorities.
 Public Provident Fund
• The PPF was instituted under Public Provident
Fund Act, 1968.
• PPF scheme is a financial instrument for workers
under unorganised sector to ensure old age income
security through adequate accumulated savings.
• A PPF account can be opened by an individual on
his own name at any nationalised bank or post
office.
• A PPF usually has a term of 15 years, can be
continued in further blocks of 5 years.
• After six years of accumulation partial withdrawal
are permitted.
• Individual with GPF, RPF, EPF account can also
open a PPF account.
• Nomination: Possible, in case of minor
account, there is no nomination facility.
• Tax Rebate: Contribution of the PPF are
eligible for income tax rebate under section
80C.
Also the interest credited to an individual’s
account is exempt from tax.
Total amount in the credit of the account
holder in the fund is totally exempt from
wealth tax, and can not be attached under an
order or decree of court in respect of any
debt or other liability.
Employee Deposit Linked Insurance
Scheme, 1976 (EDLIS)
• NEED
If the death of the employee happens in the early part of the
employment, the amount outstanding in the PF account will
be meager to fulfill needs of the family of the deceased.
• EDLIS was introduced in the year 1976 as a constituent of
EPF & MP Act, 1952.
• Among all the schemes of EPFO, EDLIS is believed to be
the most performing scheme.
• Came into force on 1st August, 1976 and introduced by
CBT
• Applicability
Being part of EPF & MP Act, 1952, EDLIS is applicable to
all establishments and factories covered by this act.

• Coverage under EDLIS

EDLIS is believed to be landmark in the history of group Life
insurance in the country, as it could provide insurance to
large number of employees.
Initially it was funded by contributions by employer and the
central government, but it has gone through many changes.
Currently government does not contribute to the scheme.
Employees do not contribute to the scheme.
• Contributions
The employer contribution is 0.5% of the basic
salary plus dearness allowance subject to a
maximum of Rs. 6, 500.
The employer remits his part of contribution within
15 days from the close of every month.
The contribution made by the employer are collected
and credited by the government to an account
called the “deposit Linked Insurance Account”
and all expenses and cost of any benefit provided
under the scheme are met out of this account.
• ASSURANCE BENEFIT
The benefit under EDLIS are payable on the death of the
employee.
Sum total of Current Accumulation of PF Account + Average
Balance in the PF account during preceding one year
If the average balance exceeds Rs 35000, then 25% extra
would be paid to the nominee, with the maximum sum
payable is Rs. 60,000
• However, the benefits payable under EDLIS are less than
those offered under a group insurance policy by a life
insurance company.
• Claim Under EDLIS
Nominee needs to submit the requisite claim form to
the commissioner of Central Board, claims have to
be settled within 30 days of submission.
• In the event of non-settlement of claim for
insufficient causes, then penal interest at a rate of
12% is to be paid to the nominee and such interest
payment is deducted from the salary of concerned
commissioner.
• Administration of EDLIS
Under section 5-A of EPF & MP Act, 1952, a Central Board
was constituted, which takes care of the entire
administration of the scheme including management of
the funds collected. CB consists of:
1. Chairman and Vice-Chairman
2. Up to 5 members appointed by the central government
3. Up to 15 people representing state govt
4. Ten people representing employers
5. Ten people representing employees

• Under Paragraph 4 of EPF & MP Act, 1952, at state

level different regional committees are established
which functions under the control of Central Board.
 Investment of the FUNDS

• Earlier the funds were invested in the form

of deposits with the central government,
1998 onwards, Funds are being invested as
per the investment pattern specified by the
Ministry of Finance.
Exemptions

• Exemption is granted under section 17 of EPF &

MP Act, 1952 along with section 28(1) of IDLI
Scheme.
• Exemption is granted under the following two
conditions;
1) Employee receive greater insurance benefits
than those under EDLIS
2) No separate contribution of premium is paid by
the employee.
 Gratuity benefit
• A lump sum is paid to the employees/
workers on their leaving the services
retirement, resignation, disability or death.
• It comes under the Payment of Gratuity Act,
1972.
• This Act came into force from 16th
Sept.,1972
Applicability

• The payment of Gratuity Act, 1972 applies to:

1. Every factory, mine, plantation, port, and
Railway Company
2. Every shop or establishment which comes under
Shops and Establishment Act of State, in which
10 or more persons are working
3. Other establishment or class of establishments,
in which 10 or more employees are employed.