EDLI – Employees Deposit Linked Insurance Scheme
Employees Deposit Linked Insurance Scheme: What Should You Know?
For paid workers in the private sector, the EPFO (Employees' Provident Fund Organization) offers the Employees' Deposit Linked Insurance Scheme or EDLI. A non-constitutional organisation called the Employees' Provident Fund Organisation (EPFO) encourages workers to save aside money for their retirement.
The organisation was established in 1951 and is overseen by the Ministry of Labour and Employment, Government of India. Indian employees and foreign workers are covered under the organisation's programs (from countries with whom the EPFO has signed bilateral agreements).
The EPFO offers the Employees' Pension Scheme (EPS) and Employees Deposit Linked Insurance Scheme, which complement one another. The employee's most recent paycheck determines the extent of the funding provided under this scheme.
In the case of the EPF member's death within the service term, the registered nominee of the Employees Deposit Linked Insurance plan is given a lump sum payout. All businesses covered by the Employees' Provident Fund (EPF) and Miscellaneous Provisions Act of 1952 is automatically enrolled in the Employees Deposit Linked Insurance Scheme.
This program works in conjunction with EPS and EPF. For more financial support, you can enrol in multiple schemes offered by the EPFO if supported by your current employer.
EDLI - All You Need To Know About the Scheme
To provide insurance benefits to EPFO members, the EDLI plan was introduced in 1976. The primary goal of the EPFO behind this program was to ensure that in the event of a person's death, their family would get financial support.
Under this insurance plan, there is no exclusion. The insurance coverage is based on the wages received during the last year of work before death.
How Does The EDLI Program Operate?
Organisations that are EPF-eligible also become EDLI-eligible. When an EPF account contribution is made, the employer also contributes to the EDLI plan each month. The EDLI fees for PF are as follows:
- The employee's contribution to the EPF account is 12% of the basic pay plus the Dearness Allowance.
- Employer's contribution is equal to 12% of the employee's base pay plus a dearness allowance, which is distributed as follows:
- About 3.67% will go to the EPF Account, and about 8.33% will go to the EPS (Employees' Pension Scheme). This is up to a maximum of INR 1250.
- About 0.50% will go to the EDLI Account. This is up to a maximum of INR 75.
Note: The business has the option to purchase group life insurance on the life of its workers.
Eligibility Criteria for EDLI Benefits
The following people may apply to receive insurance benefits under the Employees Deposit Linked Insurance Scheme:
- Family members who have been nominated under the EPF Scheme.
- If no nominee exists, the whole family (except major sons, married daughters with major sons, and married granddaughters) is eligible for EDLI Scheme.
- In the absence of a nomination and a family, the legal heir.
- A relative or a legal heir in charge of a minor candidate.
If your monthly payment exceeds INR 15,000, you are considered an ineligible employee and are not required to join the EPF. However, you can still register with the permission of your employer and the Assistant PF Commissioner.
Features of Employees Deposit Linked Insurance Scheme
The essential features of the EDLI Scheme have been mentioned below:
- About 35 times the average monthly payment for the previous 12 months, up to a maximum of INR 7 lakh, is the claim amount under the ELDI.
- The employee's basic salary plus Dearness Allowance calculates the average monthly wage.
- Under this program, a bonus of INR 1.75 lakhs is also attainable.
- If the employer chooses a better-paying life insurance plan for workers under Section 17 (2A), he may choose to leave the program.
- The amount of coverage is precisely proportionate to the employee's wage.
- For all workers, a comparable premium is due.
- Age and other personal characteristics have no impact on an employee's eligibility for coverage under this program.
- The employer must contribute 0.50% of the employee's income to this plan.
- Employer payments are paid to the Provident Fund Authorities.
- The employer can use other programs in place of EDLI, such as the LIC Group Insurance Scheme.
- Family members, legal heirs, or nominees of the member may use the insurance benefits.
- Members of EPFO have enrolled in EDLI automatically.
- Only while an active EPF member, the EPFO member is protected by the EDLI Scheme plan. After someone quits employment with a firm registered with the EPF, his family, heirs, or nominees cannot make a claim.
- There is no required amount of service time to get EDLI benefits.
- The employer must contribute to EDLI Scheme, and the employee's wages cannot be withheld for payment.
Contributions to the EDLI Scheme
The employee does not directly contribute to the EDLI Scheme plan but does benefit from the insurance coverage. Employer contributions are made.
The contributions and their features are as follows:
- A predetermined percentage of DA and salary is used as the calculation for contributions to the plan.
- Employer's contribution to the Employee's Provident Fund (EPF) is 12% less than the EPS contribution.
- All Employees make no contributions to the Employees Pension Scheme (EPS).
- Employer contribution to the Employees Pension Scheme (EPS): 8.33% (subject to a maximum of INR 1,250).
- Employer's contribution to EDLI: 0.50% (subject to a maximum of INR 75)
Calculation of Contributions to the EDLI Scheme
On behalf of the employees, the employer contributes to these plans. Before they credit the salary, the employee contribution is subtracted from the salary. No direct contributions from employees are required for these programs.
Employee contributions are computed as follows:
- For EPF – 12%
- For EPS – None
- For EDLI – None
The employer's contribution is determined as follows:
- For EPF – 3.67%
- For EPS –8.33% or INR 1,250/-
- For EDLI – 0.50 or max INR 75/-
Process for Estimating the EDLI Claim Amount
If the insured person passes away, a lump sum payment will be made to the registered nominee. The money would be paid to the legal heir if no nominee or beneficiary was listed. With effect from April 28, 2021, the payout shall be determined as follows:
- The employee's average monthly salary for the previous 12 months (limited at INR 15,000 per month) divided by 30 plus the bonus amount (INR 2.5 lakh per annum).
- As a result, the EDL's maximum payout is set at INR 7 lakh.
Documents Needed For An EDLI Payout
The claimant must submit the following documentation for the EDLI to handle the claim:
- Form 5 IF, correctly filled out, shows the insured person's death.
- Certificate of Succession in case the legitimate successor makes a claim.
- If a claim is made on behalf of a minor by someone other than the natural guardian, (The claimant must provide a guardianship certificate).
- A copy of a cancelled cheque is needed for the account where the payment is to be received.
Employees Deposit Linked Insurance Scheme - Form 5 IF
The nominees, heirs, or family members of the member must fill out the EDLI Form 5 IF to receive the insurance payout under the EDLI Scheme following the member's passing. Each person making a claim must complete a separate copy of the form. In addition, a guardian must fill out the paperwork on behalf of a minor claimant.
A single form must be completed by the guardian when there are multiple minors and only one guardian. The person making a claim must complete the application offline, and the employer must submit a death certificate that includes the member's death date. Additionally, the person making a claim must indicate the method of fund transmission.
The form and document proofs must be delivered to the regional EPF Commissioner's office. The claim must be resolved within 30 days, and if the EPF commissioner cannot do so, they will be required to pay interest at a rate of 12% per year from the date of the deadline until the date of the actual disbursement.
The Process For Claiming EDLI Benefits
Nominees must be aware of whether the dead employees had been effective participants in the EPF plan at the moment of their deaths to make a claim for funds from EDLI.
The EPFO protects employees under this program even if they change positions and work for another business before attaining a year of service. It should be emphasised at this point. A nominee must be registered with the employer by the employee.
However, even if the employee hasn't nominated a nominee, family members or legal heirs are still eligible to apply. To receive insurance benefits after a member's death, Form 5 IF must be completed. The member should have contributed actively to the EPF program at his death. The member's nominee may utilise the perks.
The surviving family members will be qualified to apply for benefits if no candidate is named. The term "family" in the EPS refers to the spouse, unmarried daughters, and male children (up to 25). In addition, the legal heir of the deceased family member may claim the insurance benefits if there are no living relatives.
The employer must sign and certify the claim form. The form must be attested by one of the following in the absence of an employer:
- Registered Officer
- Postmaster or Subpostmaster MP or MLA Magistrate President of the Village Panchayat Chairman/Secretary/Member of the Municipal or District Local Board
- CBT or EPF Regional Committee member
- Bank Manager (of the bank which maintained the account)
The EPF commissioner settles the amount within 30 days of receiving the claim after receiving all required documentation and accepting the claim. The nominee is entitled to interest at a rate of 12% per year up until the actual disbursement if the EPF commissioner fails to resolve the claim promptly.
Note: To claim benefits from all three schemes (EPF, EPS, and EDLI) at once, Form 5 IF can be completed along with Form 20 (EPF withdrawal claim in case of the deceased member) and Form 10C/Form 10D.
Advantages of EDLI Coverage
The following benefits are available to employees under the EDLI Scheme:
- There are no exclusions under the plan, and every employee is covered uniformly.
- Even if the employee dies abroad, the plan will pay the death benefit to the family.
- The employer contributes very little, but the benefit payable under the plan is reasonably good and sufficient to provide financial assistance to the passed-away employee's family.
- The EDLI scheme is an employee welfare initiative supported by the government and business owners.
- By offering employees insurance coverage, the scheme enhances workplace relationships.
Does the Employees Deposit Linked Insurance Scheme Have an Alternative?
As stated in the features, a business can select any other group insurance plan besides the EDLI. But only if the benefits offered by the selected plan are equal to or greater than those of the EDLI.
Recently, several terms for group life insurance have emerged that provide employees with higher benefits. And as a result, they are chosen by many private companies and employees. These alternatives include, among others:
- Group Insurance Program of LIC
- Group Term Insurance Plan from HDFC Life
- Super Life Premiere by Max Life Group
The Goal of the EDLI Scheme
The primary goal of the Employees Deposit Linked Insurance Scheme is to provide the policyholder's family with financial security. A spouse, an unmarried daughter, or a male child under 25 are considered family members.
The three plans, EPF, EPS, and EDLI, cannot be chosen by the employee, but they are transferable with any transition in employment. Only the existing account will continue to receive payments from the new employer.
Employees Deposit Linked Insurance Scheme is a distinctive insurance program that offers risk protection for EPF members. To use this coverage, no additional premium is required. So, if you are a salaried employee in the private sector, find out more about the EPF Act's EDLI scheme and benefit from the free insurance coverage it provides.
While EDLI Scheme benefits may exist, they provide your family with enough financial security while you are gone. The EDLI scheme offers benefits that are worthwhile choosing, and it gives employees a chance to feel slightly secure. Therefore, enrolling in the program and taking advantage of the benefit, which is paid out in a maximum of 30 days, will be the wiser choice.
Frequently Asked Questions - FAQs
Who is eligible for EDLI, and what is it?
The Employees' Provident Fund Organization (EPFO) offers insurance under the Employees' Deposit Linked Insurance Scheme (EDLI). A lump sum payment of up to INR 7 Lakhs is given to the nominee or legal successor of an active EPFO member in the event of the member's passing while the person is still providing service.
How can a nominee make an EDLI claim?
A nominee must be registered with the employer by the employee. However, even if the employee hasn't nominated a nominee, family members or legal heirs are still allowed to apply.
The nominee for making claims must submit a properly completed EDLI Form 5 IF and a few required documents. The forms are available for download at epfindia.gov.in.
How can someone make an EDLI claim after my death?
Only if the member was an active contributor to the EPF Scheme at the time of their death will they be eligible to receive EDLI funds. To process and supervise all applications simultaneously, this form can be filed with Form 20 (for EPF withdrawal) and Form 10C/Form 10D (for EPS withdrawal).
How can I check and verify the status of my EDLI claim?
The steps used for verifying EDLI claim status have been mentioned below:
- Visit the official website of EPFO. Click on the "Our Services" option you'll find there.
- Click "Know Your Claim Status" after that.
- You'll be taken to a window where you must input your UAN information and the captcha.
- After that, press the "Submit" button.
The status of your EDLI claim application will be displayed after completing the steps mentioned above.
What does EDLI exemption mean? Is the premium amount taxable for the employees?
With the help of the PF office, you can obtain insurance through LIC. That policy must offer advantages above the PF EDLI coverage. After being exempt, you must send form 7(IF) and the PF office monthly returns.
The EDLI Premium paid by the employer is regarded as regular business costs for income tax purposes.